J. SMART & CO. (CONTRACTORS) PLC
ANNUAL REPORT
AND
STATEMENT OF ACCOUNTS
TO
31s t JULY 2017
J. Smart & Co. (Contractors) PLC
DIRECTORS
DaviD W Smart, Chairman and Joint Managing Director
John r Smart, Joint Managing Director
alaSDair h roSS
Patricia Sweeney
COMPANY SECRETARY
Patricia Sweeney
REGISTERED OFFICE
28 cramonD roaD South,
eDinburgh,
eh4 6ab
SUBSIDIARY COMPANIES
mcGowan anD comPany (contractorS) limiteD
cramonD real eState comPany limiteD
thomaS menzieS (builDerS) limiteD
concrete ProDuctS (KirKcalDy) limiteD
c. & w. aSSetS limiteD
Smart ServiceD officeS limiteD
REGISTRARS AND TRANSFER OFFICE
equiniti limiteD,
34 South gyle creScent,
South gyle buSineSS ParK,
eDinburgh,
eh12 9eb
BANKERS
banK of ScotlanD,
75 george Street,
eDinburgh,
eh2 3ew
AUDITOR
french Duncan lLP,
chartereD accountantS,
133 finnieSton Street,
glaSgow,
g3 8hb
SOLICITORS
anDerSon Strathern llP,
1 rutlanD court,
eDinburgh,
eh3 8ey
1
J. Smart & Co. (Contractors) PLC
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the Company will be held at the Registered
Ofice, 28 Cramond Road South, Edinburgh on 14th December 2017 at 12 noon, for the following purposes:
1. To receive and consider the Statement of Accounts for the year ended 31st July 2017 and the Report of the Directors
and the Independent Auditor’s Report.
2. To approve the Directors’ Remuneration Policy as set out in the Directors’ Remuneration Report on pages 20 to 22
in the Annual Report.
3. To approve the Directors’ Remuneration Report for the inancial year ended 31st July 2017 as set out on pages 20 to
25 in the Annual Report.
4. To declare a Final Dividend of 2.17p per share.
5. To re-elect Alasdair H Ross as a Director, who retires in accordance with provision B.7.1 of the UK Corporate
Governance Code.
6. To re-elect Patricia Sweeney as a Director, who being appointed in the year, retires in accordance with provision
B.7.1 of the UK Corporate Governance Code.
7. To re-elect French Duncan LLP as Auditor.
8. To authorise the Directors to determine the remuneration of the Auditor.
9. To authorise the Company, via a special resolution, for the purposes of section 701 of the Companies Act 2006 to make
market purchases (as deined in section 693(4) of the Companies Act 2006) of its ordinary shares of 2p each (ordinary
shares) provided that:
(a)
the Company does not purchase under this authority more than 10% of the nominal value of the Company’s issued
share capital at the date of this notice;
the minimum price which the Company may pay for each ordinary share is 2p (exclusive of expenses); and
the maximum price which the Company may pay for each ordinary share is the higher of:
(i)
105% (exclusive of expenses) of the average market value of the Company’s equity shares for the ive
business days prior to the day the purchase is made according to the Daily Oficial List of the London
Stock Exchange; and
the higher of the price of the last independent trade and the highest current independent bid for an ordinary
share on the trading venue where the purchase is carried out.
(b)
(c)
(ii)
This authority is to apply until the end of the next Annual General Meeting (or, if earlier, until the close of business
on 14th February 2019) but the Company may enter into a contract to purchase ordinary shares which will or may be
completed or executed wholly or partly after this authority ends, the Company may purchase these ordinary shares
pursuant to any contract as if the authority had not ended. Under this authority any shares purchased by the Company will
be cancelled.
10. To transact any other business of an Annual General Meeting.
Explanatory notes providing information in relation to each of the proposed resolutions in this Notice of Meeting can be
found on the Company’s website www.jsmart.co.uk.
A member entitled to attend and vote at this Meeting is entitled to appoint one or more proxies to attend
and vote on a poll instead of him/her. A proxy need not be a member. Forms of proxy, if used, must be
lodged with the Registrars of the Company at least 48 hours before the time ixed for the Meeting. Forms of
proxy may also be lodged electronically by submitting a duly completed scanned copy of the proxy card to
proxy.votes@equiniti.com. You may not use the electronic address provided either in this Notice of Meeting or any related
documents (including the Form of Proxy) to communicate with the Company for any purpose other than that expressly stated.
In accordance with section 311A of the Companies Act 2006, the contents of this Notice of Meeting, details of the total
number of shares in respect of which members are entitled to exercise voting rights at the Annual General Meeting
and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the
Company after the date of this Notice will be available on the Company’s website.
2
J. Smart & Co. (Contractors) PLC
Pursuant to section 319A of the Companies Act 2006, the Company must cause to be answered at the Annual General
Meeting any question relating to the business being dealt with at the Annual General Meeting which is put by a member
attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or
the good order of the Meeting that the question be answered or if to do so would involve the disclosure of conidential
information.
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
28 Cramond Road South,
Edinburgh
EH4 6AB
14th November 2017
3
J. Smart & Co. (Contractors) PLC
CHAIRMAN’S REVIEW
ACCOUNTS
Headline Group proit for the year before tax, including an unrealised surplus in revalued property and a proit on the unforeseen
sale of property, was £4,037,000 compared with £3,752,000 last year.
As forecast underlying proit before tax for the year of £3,423,000 (including £613,000 proit from property sales) was less
than last year’s igure of £3,616,000 (including £186,000 proit from property sales). In our view discounting the increase in the
revaluation of the commercial property portfolio provides a truer relection of Group performance.
The Board is recommending a Final Dividend of 2.17p making a total of 3.12p which compares with 3.07p for the previous year.
The Final Dividend will cost the Company no more than £973,000.
TRADING ACTIVITIES
Group construction activities including private residential sales decreased by 17%. Own work capitalised increased by 55%
and headline Group proit increased by 8%. If you disregard the unexpected property sale headline Group proit would have
decreased by 9%. Underlying Group proit decreased by 5%.
Turnover in contracting was less than last year and the loss was increased. As forecast private residential sales were less than the
previous year. Sales in precast concrete manufacture have increased marginally, but proit has decreased.
The two large mixed social housing and private residential developments at Seaield Street and Pilton Drive, Edinburgh are now
complete. The social housing contracts at Fleming Place, Edinburgh continue to make progress, but will be fully complete by
April 2018. A further social housing contract at Ferrymuir, South Queensferry is to commence by April 2018, but this is by no
means certain due to the continuing and unwelcome drawn out statutory approval process.
A mixed private housing and affordable housing development at West Bowling Green Street, Edinburgh started after the inancial
year end, will provide 98 residential units and 4 commercial units. First completions will not be achieved during the current
inancial year.
The occupancy levels at our industrial estates, especially in the smaller size bracket, continue to be robust. We have inally
encountered rental growth across all sizes of industrial units. This has partly been caused by a dearth of new build industrial
development exacerbated in the Edinburgh area by a lack of industrial land supply.
The second phases at Inchwood Park, Bathgate and West Edinburgh Business Park, South Gyle, Edinburgh are progressing well
and letting prospects are encouraging. The joint venture industrial development at Gartcosh, near Glasgow, has been delayed,
but is still likely to proceed.
The voids in our ofice properties were reduced by the sale of CityWest, Robertson Avenue, Edinburgh. We launched a serviced
ofice centre at our multi-let ofice building at Links Place, Leith, Edinburgh with our new subsidiary company, Smart Serviced
Ofices Limited. This has taken time to let but has assisted in attracting tenants to other vacant suites in the building.
FUTURE PROSPECTS
Work in hand in contracting, as alluded to above, is considerably less than last year. All of our contracting work, in the Housing
Association sector, in the past ive years has been site acquisition led and due to increasing land values opportunities in this
regard have decreased. This, coupled with a highly competitive tender market, means the likelihood of future contracting work
in this sector does not look promising at present.
There will be no private housing sales this year. Property valuation levels have improved since last year, but it remains to be seen
if this trend will continue. Planning applications will be submitted this year for a residential development at Rosyth and a third
phase of industrial development at West Edinburgh Business Park.
Due to reduced turnover, which will impact on the recovery of ixed overhead costs, and the cost of redundancies it is likely that
underlying proit will be less than this year’s underlying proit.
Finally, I would like to pay tribute to the previous Chairman, John M Smart, who served your company for 50 years, 39 as a
Director, 32 as Joint Managing Director/Managing Director and 29 as Chairman. He presided over an almost unbroken record
of proit for your company. We all wish him well for a long and happy retirement.
14th November 2017
4
DaviD W Smart
Chairman
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS
31st JULY 2017
The Directors present their Annual Report and the audited inancial statements of the Group for the year ended
31st July 2017.
STRATEGIC REPORT
The Companies Act 2006 requires the Directors to prepare a Strategic Report which presents a fair review of the business
during the year to 31st July 2017 and of the position of the Group at the end of the inancial year. The Strategic Report
also includes a description of the principal risks and uncertainties faced by the Group. The Strategic Report can be found
on pages 9 to 14 and is incorporated into the Report of the Directors by reference.
CORPORATE GOVERNANCE
The Company is required, as a premium listed company on the London Stock Exchange, to prepare a report on Corporate
Governance in accordance with the Financial Reporting Council’s UK Corporate Governance Code (the Code). The
information required by the Code and also the Disclosure and Transparency Rules and the Listing Rules can be found on
pages 16 to 19 and is incorporated into the Report of the Directors by reference.
RESULTS AND DIVIDENDS
The proit of the Group after tax for the year ended 31st July 2017 amounted to £3,727,000 (2016, £3,488,000).
During the year the Company paid on 21st December 2016 a inal dividend for the year to 31st July 2016 of 2.15p per share
(2016, 2.10p) and paid on 5th June 2017 an interim dividend for the year to 31st July 2017 of 0.95p per share (2016, 0.92p).
The Directors recommend a proposed inal dividend for the year of 2.17p per share, making a total for the year of 3.12p.
This inal dividend is subject to approval by the shareholders at the Annual General Meeting in December 2017 and has
not been included as a liability in these inancial accounts. If this dividend is approved it will be paid to the members on
the share register of the Company at the close of business on 24th November 2017. Dividend warrants will be posted on
19th December 2017.
DIRECTORS
The following were Directors of the Company during the inancial year ended 31st July 2017:
−
−
−
−
−
John M Smart (retired 27th April 2017)
David W Smart
John R Smart
Alasdair H Ross
Patricia Sweeney (appointed 26th April 2017)
Details of the Directors are given on page 15.
APPOINTMENT AND REPLACEMENT OF DIRECTORS
The Company’s Articles of Association (the Company’s Articles) give the Directors the power to appoint or remove
any Director. Initial appointments must be approved by the Board of Directors but anyone so appointed must be
re-elected by ordinary resolution at the next Annual General Meeting of the Company. In accordance with the Company’s
Articles, Directors are not required to retire by rotation, however, in accordance with provision B.7.1 of the UK
Corporate Governance Code, with the exception of the Chairman, all Directors must retire and offer themselves for
re-election at the Annual General Meeting at least every three years.
5
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued)
31st JULY 2017
DIRECTORS’ INTERESTS
Details of Directors’ interests in the ordinary share capital of the Company are given in the Directors’ Remuneration
Report. There have been no changes in Directors’ interests between 31st July 2017 and 20th October 2017.
Other than the original employment contract Directors received on joining the company, no Director has been issued with
a Director’s Service Contract on appointment as a director. No Director has a material interest in any contract to which
the Company or any Subsidiary Company was a party to during the year.
DIRECTORS’ POWERS
The Company’s Articles states that the Directors may exercise all of the powers of the Company which also includes the
right of the Directors to buy back the Company’s shares based on the authority given by the shareholders following the
passing of a special resolution at the Company’s 2016 Annual General Meeting.
INDEMNIFICATION OF DIRECTORS
In accordance with the Company’s Articles and to the extent permitted by law, Directors are granted an indemnity by the
Company in respect of liabilities incurred as a result of their ofice. The Directors are also indemniied against the cost
of defending any proceedings whether criminal or civil in which judgement is given in favour of the Director or in which
the Director is acquitted or the charge is found not proven. The Company has maintained Directors’ and Oficers’ liability
insurance cover throughout the inancial year.
CAPITAL MANAGEMENT AND SHAREHOLDER INFORMATION
The capital structure of the Company consists of issued share capital, reserves and retained earnings represented
predominantly by investment properties, working capital and cash.
The Company’s issued ordinary share capital as at 31st July 2017 comprises a single class of ordinary share of 2p each.
Details of the issued share capital are shown in note 22 to the Accounts.
At the Annual General Meeting in 2016 the Company was authorised by the shareholders to purchase, in the market, up
to 10% of the Company’s issued share capital, as permitted under the Company’s Articles. The purpose of the market
purchase is to enhance the earnings per share and/or the equity shareholders’ funds per share. The Directors are seeking
renewal of this authority at the 2017 Annual General Meeting.
During the year the Company made market purchases of 500,000 ordinary shares of 2p under the existing authority, for a
total consideration of £550,000. The shares purchased were subsequently cancelled, and represented less than 2% of the
Company’s issued share capital at the start of the inancial year.
All members who hold ordinary shares are entitled to attend and vote at a General Meeting. On a show of hands at a
General Meeting every member present in person and every duly appointed proxy shall have one vote and on a poll, every
member present in person or by proxy shall have one vote for every ordinary share held or represented. The Company is
not aware of any agreements between shareholders that may result in restrictions on voting rights of shareholders. Rights
attached to ordinary shares may only be varied by special resolution at a General Meeting.
There are no speciic restrictions on the transfer of securities in the Company, other than those imposed by prevailing
legislation and the requirements of the Listing Rules in respect of Company Directors. The Company is not aware of any
agreements between shareholders that may result in restrictions on the transfer of securities.
Details of substantial shareholders can be found in the Company’s Corporate Governance Report.
6
7
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued)
31st JULY 2017
ARTICLES OF ASSOCIATION
The Company’s Articles can only be amended by a special resolution at a General Meeting. No amendments are proposed
to be made to the existing Company Articles at the 2017 Annual General Meeting.
CHANGE OF CONTROL
The Company is not party to any signiicant agreements which take effect, alter or terminate upon change of control of
the Company following a takeover bid. The Company does not have any agreements with any Director or employee that
would provide compensation for loss of ofice or employment, whether through resignation, purported redundancy or
otherwise resulting from a takeover bid.
POLITICAL DONATIONS AND POLITICAL EXPENDITURE
It is the policy of the Group not to make donations for political purposes to EU Political Parties or incur EU Political
Expenditure and accordingly neither the Company nor its Subsidiaries made donations or incurred such expenditure in
the year.
GREENHOUSE GAS EMISSIONS
The Companies Act 2006 (Strategic Report and Directors’ Report) Regulation 2013 requires all quoted companies to
report the greenhouse gas emissions for which they are responsible and on any environmental matters which are material
to the company’s operations.
Carbon emissions and energy use:
Emissions from:
Combustion of fuel and operation of facilities
Electricity, heat, steam and cooling purchased for own use
.
Total emissions
.
.
.
.
.
.
.
.
.
.
Group’s chosen intensity measurement:
Emissions reported above normalised to per full time equivalent employee
Emissions reported above normalised to per £million of revenues
.
2017
Tonnes of CO2e
2016
Tonnes of CO2e
1,530
323
1,853
7.127
81.059
1,412
329
1,741
5.842
59.979
Changes in the total greenhouse gas emissions by the Group over the year are a result of changes in the mix of construction
activities, contributing to the increase in emissions from fuel combustion and the decrease in emissions from purchased
electricity.
A decrease in staff within construction activities has increased the greenhouse gas emissions per employee metric and the
decrease in revenue from construction activities has increased the emissions normalised by revenue.
We have reported on all the emission sources required under the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013. These sources fall within our Statement of Accounts. We do not have responsibility for any
emission sources that are not included in our Statement of Accounts.
Our greenhouse gas emissions have been calculated using the GHG Protocol Corporate Accounting and Reporting
Standard (revised edition), data gathered to fulil our requirements under these Regulations, and emission factors from the
UK Government’s GHG Conversion Factors for Company Reporting 2016 and 2017 for the respective years. Emissions
are calculated on the location based methodology.
WASTE MANAGEMENT
We manage waste in accordance with the waste hierarchy and ensure compliance with all applicable environmental
legislation across all our operations. Construction waste is managed through site waste management plans which ensure
waste arising is minimised, reused or recycled. Waste reduction is considered at the building design stage and any waste
arising in construction is segregated either on site or off site. Where possible, waste is reused on site and waste to landill
is minimised with preference given to recycling or energy recovery. Training is provided to all staff and subcontractors
and waste champions are assigned to each site to ensure compliance with our waste policies and procedures.
7
J. Smart & Co. (Contractors) PLC
REPORT OF THE DIRECTORS (continued)
31st JULY 2017
GOING CONCERN
The Group’s business activities, performance and principal risks and uncertainties are set out in the Strategic Report.
The Group has adequate inancial resources and is not reliant on external funding, and the Directors believe that the
Group is well placed to manage its business risks successfully. After making enquires, the Directors have a reasonable
expectation that the Company and Group have adequate inancial resources to allow the Company and Group to continue
in operational existence for the foreseeable future and therefore considers the adoption of the going concern basis as
appropriate for the preparation of the Annual Report and Statement of Accounts.
FUTURE DEVELOPMENTS
It is not anticipated that the activities of the Company and its Subsidiaries, as described in the Strategic Report, will
substantially change in the immediate future.
POST BALANCE SHEET EVENTS
There have been no events occurring after the Balance Sheet date that the Directors consider should be brought to the
attention of the shareholders.
AUDITOR
The Company’s auditor, French Duncan LLP, has expressed willingness to continue in ofice. Resolutions to re-appoint
them as the Company’s auditor and to authorise the Directors to determine their remuneration will be proposed at the
Company’s forthcoming Annual General Meeting.
CAUTIONARY STATEMENT
The Chairman’s Review on page 4 and the Strategic Report on pages 9 to 14 have been prepared to provide additional
information to members of the Company to assess the Group’s strategy and the potential for the strategy to succeed. It
should not be relied on by any other party or for any other purpose.
This Annual Report and Statement of Accounts contain certain forward-looking statements relating to operations,
performance and inancial status. By their nature, such statements involve risk and uncertainty because they relate to events
and depend upon circumstances that will occur in the future. There are a number of factors, including both economic and
business risk factors that could cause actual results or developments to differ materially from those expressed or implied
by these forward-looking statements. These statements are made by the Directors in good faith based on the information
available to them up to the time of their approval of this Report.
STATEMENT OF DISCLOSURE TO AUDITOR
The Directors who held ofice at the date of approval of the Report of the Directors, conirm that, so far as they are each
aware, there is no relevant audit information of which the Company’s Auditor is unaware; and each of the Directors has
taken all steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and
to establish that the Company’s Auditor is aware of that information.
14th November 2017
8
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT
31st JULY 2017
The Directors present their Strategic Report of the Group for the year ended 31st July 2017.
The purpose of the Strategic Report is to provide the members of the Company with information to allow them to assess
how the Directors have performed their duty to promote the success of the Company and Group.
OUR BUSINESS MODEL, STRATEGY AND OBJECTIVES
The Company was established in 1947 and was listed on the London Stock Exchange in 1965.
The principal activities of the Group are building and civil engineering contracting, residential development for sale, the
development of industrial and commercial property for lease, the manufacture of hydraulically pressed concrete products,
and the provision of serviced ofice spaces. All the construction work involved in these activities is carried out by the
Company and its Subsidiaries. Sub-contracting is kept to a minimum. The main area of operations is the central belt of
Scotland.
The main construction activity undertaken by the Group is that of social housing for several housing associations and
registered social landlords predominately in the Edinburgh area and is undertaken by the Company, J. Smart & Co.
(Contractors) PLC.
The Group has a portfolio of self-inanced industrial and commercial properties which are owned and managed by
subsidiary company, C. & W. Assets Limited. The investment properties are located throughout the central belt of
Scotland but primarily in the Edinburgh area, this being the area of the country we are familiar with and understand. Our
portfolio currently extends to more than 1,000,000 sq ft.
The Group has ive other subsidiaries. Thomas Menzies (Builders) Limited carries out small to medium sized building
and civil engineering work for a variety of clients. McGowan and Company (Contractors) Limited provides plumbing
support to the main construction companies. Concrete Products (Kirkcaldy) Limited manufactures hydraulically pressed
concrete products sold to the trade. Cramond Real Estate Company Limited, is the investment holding company of the
Group and holds the Group’s equity investments and monies on bank deposits. Smart Serviced Ofices Limited which
trades as Foxglove Ofices provides serviced ofice spaces in Leith.
The Group also has interests in a number of Joint Venture Companies which were established for purposes of property
development.
The Group operates out of premises in Edinburgh and Kirkcaldy, with the centralised administration and inance function
being at the head ofice in Edinburgh. Full support is given by the company Directors and the inance staff to all Group
companies based at the two locations.
We maintain a core employee base which is beneicial to the growth and success of the Group due to the fact that they have
the expertise to ensure the construction activities of the Group are eficiently run, achieve high level of quality of work
and retain control over operations. Employees who manage the Group’s investment property portfolio are fully aware of
current market conditions and ensure that there is appropriate marketing of the Group’s investment property portfolio. We
employ our own maintenance team thereby ensuring that our investment property portfolio is always in good condition
and ready for let.
Our objectives are to identify and exploit promising business opportunities as they arise to the beneit of the Group, its
shareholders and employees without over extending Group resources. While endeavouring to complete all our operations
as eficiently and to as high a standard as possible we do not set ourselves general performance yardsticks or volumetric
targets.
8
9
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2017
OUR BUSINESS MODEL, STRATEGY AND OBJECTIVES (continued)
To achieve these objectives our strategy is to continue to maintain and develop the relationships we have with social housing
providers and develop relationships with new and existing partners to establish new areas of construction opportunities,
retain our core workforce and only use specialist subcontractors with proven track records in the Group to ensure work
quality. We will continue to build both our residential properties and investment property portfolio within the central belt
of Scotland, being the area of the country with which we are familiar. We will build up our resources to ensure the Group
has suficient current working capital facilities and inancing for future commercial and private residential developments.
In achieving our objectives we aim to generate value by creating long-term and sustainable returns for our shareholders
by growing our income and proits and increasing the value of our investment portfolio and the net assets of the Group.
PERFORMANCE REVIEW
Construction activities
Revenue
Operating loss
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000)
25,419)
(673)
2016
£000
30,682)
(102)
Turnover in construction activities decreased in the year mainly due to the fact that there was considerably less revenue
from our private residential development than in the previous year. At the start of the current year there were only four
properties to be sold and all these sales occurred in the year.
During the year we completed two of our large mixed social housing developments which has also contributed to the
decrease in turnover. We continued construction at two smaller social housing developments but no new developments
commenced in the year.
During the year we commenced construction of Phase 2 at two of our industrial developments which accounted for the
increase in own work capitalised.
The decrease in construction turnover has impacted on the recovery of ixed overheads and together with the loss
provisions on current contracts has resulted in the loss from construction activities increasing in the year.
The Directors continue to monitor, on a monthly basis, all construction contracts currently underway with regards to
costs incurred and the proitability of the contract. The Directors also monitor the level of ixed overheads with a view to
minimising these where possible.
Investment activities
.
Income from investment properties .
Proit on sale of investment properties
.
Net surplus on valuation of investment properties
.
Operating proit from investment properties
.
.
Income from available for sale inancial assets
.
Proit on sale of available for sale inancial assets .
Share of proits in Joint Ventures
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
6,090)
613)
614)
4,519)
2016
£000
5,520)
186)
136)
3,616)
32)
22)
42)
14)
–)
33)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
10
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2017
PERFORMANCE REVIEW (continued)
Investment activities (continued)
Income from the Group’s investment property portfolio continues to increase, mainly due to increased occupancy in
both our industrial and commercial properties but also due to increased rental values. Occupancy levels in our industrial
properties continue to be satisfactory with interest continuing to be shown in our vacant properties. Although the voids
in our commercial properties still remain high the overall level of these voids has reduced due to the sale of one of our
commercial properties in the year and new tenants taking occupancy in the year.
Other than the sale of one of our commercial properties there have been no other movements in our investment property
portfolio this year. The Group is currently undertaking the construction of the next phases at two of our current industrial
developments which will be completed prior to the end of the next inancial year. Letting prospects in these new phases
are encouraging. The Group continues to refurbish and improve the existing portfolio of properties to ensure that they are
of a standard expected of existing and new tenants.
Property valuations continue to improve and the surplus on the valuation of investment properties accounted for this year
in the Income Statement was higher than that recognised last year.
The increased revenue, surplus on valuation of investment properties and the proit earned on the sale of the investment
property have resulted in the increase in the proit earned.
During the year the Group added to its portfolio of available for sale inancial assets and this has resulted in the increase
in the level of income from these assets. Also during the year there were disposals of assets which resulted in a proit
being earned.
The Group’s share of proits in Joint Ventures continues to increase and are considered to be of a reasonable level.
Results and financial position
Proit before tax
Net bank position
Net assets
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
4,037
20,269
93,858
2016
£000
3,752
19,676
88,836
Although the Group has reported a higher proit before tax than last year this has been due to the increase in proit earned
by the investment activities of the Group. The Group loss suffered in construction activities has increased this year due
to the reduced level of turnover, and the impact of recovery of overheads.
Our net bank position, which comprises monies held on deposit, cash and cash equivalents and the netting of our bank
overdraft, has improved only slightly this year. Although the proit before tax position has increased and this has been
relected through to the cash lows from operating activities this money has been utilised for purchase of own shares and
the dividends paid in the year. The proceeds received from the sale of our commercial property have all but matched
the monies spent by the Group on expenditure on property, plant and equipment, the construction of new investment
properties and the purchase of new available for sale inancial assets. The Group continues to remain debt free.
The Group’s net assets are impacted by the proit earned in the year, the movement in the valuation of the Group’s
available for sale inancial assets, the increase in the Group’s retirement beneit surplus which was mainly due to the
actuarial gain recognised in the year, net of the shares bought back in the year and the dividends paid to shareholders.
10
11
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2017
FINANCIAL INSTRUMENTS
The Group’s inancial instruments consist of bank balances and cash, available for sale inancial assets, trade receivables
and trade payables. The main purpose of the inancial instruments are to provide working capital for the Group’s continuing
activities and provide funding for future activities whether in construction or investment. Given the nature of the Group’s
inancial instruments the main risk associated with these is credit risk, however this is minimised due to the fact that
exposure is spread over a number of counterparties and customers. The Group is not exposed to interest rate risk as it
does not have any net debt but it does suffer from fallen interest rates on the amount we can earn on monies on deposit.
TOTAL DIVIDEND
The Directors are recommending a inal dividend of 2.17p per share which taken with the interim dividend of 0.95p
already paid in the year gives a total dividend for the year of 3.12p (2016, 3.07p), being an increase of 2% on the dividend
rate for 2016.
GREENHOUSE GAS EMISSIONS
The Group is required to report the greenhouse gas emissions for which it is responsible and on any environmental matters
which are material to the Group’s operations. Details of our emissions for the year to 31st July 2017 are set out in the
Report of the Directors on page 7.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group and the mitigating factors taken by the Group against these risks
are detailed below. The principal risks noted below are not all of the risks faced by the Group but are those risks which
the Group perceives as those which could have a signiicant impact on the Group’s performance and future prospects.
Area of principal risk or uncertainty
and impact
By focusing external construction
activities in the social housing sector,
which
is a competitive market,
failure to win new contracts would
impact on our volume of work and
therefore the workforce required by
the Group.
availability
Decline in home buyer conidence
and
affordable
mortgages resulting in stalling of
private house sales.
of
Mitigating actions and controls
• Maintain long term relationships with social housing providers, resulting
from high standards of service, quality and post construction care thus
giving the Group an advantage over other builders when contracts are
awarded on criteria other than cost only.
• Identify potential build sites or include the provider within private housing
developments in relation to the element of affordable housing required.
• When workload is reduced workforce can be diverted to the Group’s own
commercial and private residential developments.
• Continue to acquire land for development for either private housing
developments or for resale to social housing providers as part of a construction
contract.
• Develop new areas of construction activities.
• Develop new joint venture opportunities.
• Providing a range of purchase assistance schemes to buyers.
• Building developments in popular residential areas.
• Building high quality speciication homes with attention to detail which sets
them apart from other new build homes and therefore attractive to buyers.
• Building a range of homes within a development thus providing choice to
buyers.
• Providing sales incentives.
• Consider letting of homes at market rates until the market improves.
12
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2017
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Area of principal risk or uncertainty
and impact
Social housing sector and in general
is highly
the housing market
competitive with tight margins.
Reduction
in rental demand for
investment properties may result in a
fall in property valuations.
Reduction in demand for UK real
estate from investors may result in a
fall in valuations within our investment
property portfolio, this could result in
delays in investment decisions which
could impact on our activities.
Political events and policies result
in uncertainty until inal decisions
have been made and the impact of
decisions are known, this could result
in delays in investment decisions
which could impact on our activities.
Reduction of inancial resources.
Mitigating actions and controls
• We are an ‘all trades’ contractor who employs our own personnel in all
basic building trades who are supervised by site agents who are long serving
employees of the Group, who have been promoted through their trades, thus
ensuring control of labour costs on contracts.
• We have invested heavily in plant and the maintenance thereof and therefore
limit our costs on contracts by utilising own plant as opposed to incurring
higher costs of hiring plant.
• Subcontractors employed by the Group are specialists in their ields and in
the main subcontractors have previously been used by the Group therefore
quality of work and reliability is known. No labour only subcontractors are
employed.
• In house architectural technicians and surveyors provide pre-contract design
advice to resolve potential technical problems with the build and therefore
potential costs.
• Only commence speculative developments after careful assessment of the
market.
• Restricting our operations to the central belt of Scotland being the area of
the country with which we are familiar.
• Continually maintain and refurbish existing properties to retain existing
tenants and attract new tenants.
• Provide necessary inancial incentives to retain existing tenants at end of
current leases and attract new tenants.
• The Directors regularly review the property market to ascertain if changes
in the overall market present speciic risks or opportunities to the Group.
• Restricting our operations to the central belt of Scotland being the area of
the country with which we are familiar.
• Before any decisions are taken by the Directors in any area of the Group’s
activities the level of uncertainty and range of potential outcomes arising
from political events and policies are considered.
• Ensure resources are not over committed and only undertake commercial
and private housing developments after due consideration of the inancial
impact on the Group inancial resources.
• Build up resources to ensure the Group has suficient inance for working
capital requirements and inancing of commercial and private housing
developments.
• Spread cash reserves over several banks taking account of the strength of
the bank and interest rates attainable.
• Invest resources in equities also taking account of the security of the
investment and the yields attainable.
13
J. Smart & Co. (Contractors) PLC
STRATEGIC REPORT (continued)
31st JULY 2017
VIABILITY STATEMENT
The Directors have assessed the viability of the Group over a three year period to July 2020, taking account of the Group’s
current inancial strength, business model and strategy. The Directors have also taken account of the principal risks and
uncertainties facing the Group and the actions being taken to mitigate these risks as described above.
The assessment period of three years has been chosen as the Directors consider this period to be appropriate as it its well
with the Group’s development and investment property cycles.
The Group’s inancial planning process consists of cash low projections based on the current inancial position and
assumptions on future developments and investment property acquisitions and disposals. As the Group is net debt free the
Directors are assessing the cash impact of their assumptions of future activity to ensure that this position is maintained.
The Directors vary their assumptions in terms of economic, investment and other factors to different scenarios to assess
the impact on the Group’s cash position. Even with these sensitivities applied the Group is net debt free.
Based on this assessment the Directors have a reasonable expectation that the Group will continue in operation and meet
its liabilities as they fall due over the period to July 2020.
EMPLOYEES
The Group recognises the contribution of the staff to the success of the Group. The Group operates with a core employee
base who in the main have been with the Group for a considerable length of time and have gained a signiicant knowledge
of the sectors the Group operates in and of the companies within the Group. Where appropriate the Group promotes from
within whether that be the Directors, staff or site employees. The Group recognises the importance of retaining its core
staff to ensure its future success.
The Group does not have a speciic Human Rights policy but it does have policies on recruitment and retention of
employees and communication with employees which are aimed at ensuring employees are fairly treated during their
employment with the Group.
The Group is committed to providing equal opportunities in recruitment and employment, full and fair consideration is
given to all applicants for employment and to all existing employees for promotion. Where employees become disabled
during their employment and are unable to fulil current duties they are offered suitable alternative employment within
the Group, if feasible.
It is the Group’s policy that there should be effective communication with employees at all levels, on matters which affect
their current jobs or future prospects and all Directors and senior staff members make themselves available to all staff
to discuss any matters of concern. In achieving this policy, the Directors are aware of the need to take account of the
practical and commercial considerations of the Group, and the needs of the employees.
A breakdown by gender of Directors, senior managers and all employees is given below:
Directors
Senior Managers
Total Employees
Male
3
2
246
Female
1
-
14
14th November 2017
14
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
J. Smart & Co. (Contractors) PLC
DIRECTORS
John M Smart, Chairman and Managing Director Aged 73
Joined the Company in 1967
Appointed Director in 1978 and appointed Chairman in 1988
Retired as Chairman and Managing Director on 27th April 2017
David W Smart, Chairman and Joint Managing Director Aged 44
Joined the Company in 1998
Appointed Director in 2010
Appointed Chairman and Joint Managing Director on 27th April 2017
John R Smart, Joint Managing Director Aged 47
Joined the Company in 2002
Appointed Director in 2013
Appointed Joint Managing Director on 27th April 2017
Alasdair H Ross Aged 55
Joined the Company in 1989
Appointed Director in 2012
Patricia Sweeney Aged 48
Joined the Company in 2011
Appointed Director on 26th April 2017
15
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE
31st JULY 2017
STATEMENT OF COMPLIANCE
This statement details how your Company has applied the main and supporting principles of corporate governance as set
out in the Financial Reporting Council’s UK Corporate Governance Code issued in April 2016 (the Code). A copy of the
Code can be found on the Financial Reporting Council’s website, www.frc.org.uk.
The Board of Directors (the Board) is committed to the principles of openness, integrity and accountability in dealing with
the Company’s affairs and believes it has always acted with probity in the best interests of the Company, its employees and
shareholders without recourse to guidance or instruction from others and fully intends to continue to do so in the future.
The Board recognises that as it has no non-executive Directors on the Board, no Nomination, Remuneration or Audit
Committees have been established and therefore the Company has not complied with any of the principles of the Code
relating to non-executive directors or the establishment and operations of these committees. Also, the Board recognises that it
has not fully complied with other principles of the Code relating to the division of responsibilities and evaluation of the Board
as a whole and the Directors individually. Details and explanations for all principles not complied with are given below.
THE BOARD
The Company is led by the Board which comprises the executive management of the Company, being the Chairman
who is one of the two Joint Managing Directors and two other executive Directors, and thus maintains full control of the
Company, sets the strategic aims of the Company and ensures the Company has adequate inancial and human resources
to meet its objectives. All the Directors worked for the Company prior to their appointments as Director and therefore
have the appropriate skills, experience and knowledge of the Company to ensure that the Board discharges its duties and
responsibilities effectively. On 27th April 2017, John M Smart retired as a Director and from the Company. David W
Smart became the Chairman of the Company on 27th April 2017 and along with John R Smart became Joint Managing
Director. Patricia Sweeney was appointed a Director on 26th April 2017.
Decisions are taken by the Board quickly and effectively following ad hoc consultation among the Directors concerned
when any matter arises. Your Board takes the view that this direct and lexible approach is preferable to the more
cumbersome procedures prevalent in larger organisations and has made a considerable contribution to your Company’s
continuing success and ensures that this approach best serves the interests of the Company and its shareholders.
The Board held 3 formal Board Meetings in the year, attendance at these meetings was as follows:
John M Smart (retired 27th April 2017)
David W Smart
John R Smart
Alasdair H Ross
Patricia Sweeney (appointed 26th April 2017)
3
3
2
3
-
During the year the Directors also met regularly on an ad hoc basis to undertake the executive management of the
Company and take decisions on all material matters quickly and effectively thus exercising full direction and control of
the Company. Given the way in which the Board and Company operates there is no requirement for a formal schedule of
matters reserved for the Board’s decision.
The Chairman of the Company is also one of the Joint Managing Directors. Bearing in mind the size of the Company,
the Board sees no value in splitting the role of the Chairman and Managing Director, a policy which has served your
Company well over many years. The Chairman is responsible for the leadership of the Board, ensuring that all the
Directors receive accurate, timely and clear information on issues arising at formal and ad hoc Board meetings, setting
Board agendas and ensuring adequate time is given to discussion of the agenda points. The members of the Board have
complete freedom to seek independent professional advice, at the Company’s expense, when they feel it is appropriate to
do so. All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that
Board procedures are followed and that applicable rules and regulations are complied with. All Directors openly express
their views and make a valuable contribution to the running of the Company.
Information regarding the Directors’ interests in ordinary shares of the Company is given in the Directors’ Remuneration Report.
16
17
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued)
31st JULY 2017
THE BOARD (continued)
The Chairman is also responsible for ensuring effective communication with shareholders and ensuring that their views
and concerns are brought to the attention of the Board.
The Board considers that increasing the manning level of the Board by 50% by the appointment of two non-executive
Directors would increase costs and impose an additional administrative burden for no discernible beneit and, accordingly,
would serve no useful purpose. As a result of not appointing non-executive Directors, the Company has not established
Nomination, Remuneration or Audit Committees or identiied an independent Director.
As the Company does not have a Nomination Committee, nominations for appointment of new Directors to the Board are
submitted by the Chairman for approval by the other members of the Board. As all the Directors of the Company were
long-serving employees of the Company at the date of appointment this ensures that the skills, experience and knowledge
are retained in the Company and onto the Board. Due regard is taken of the beneits of diversity, including gender on the
Board when appointments are made. No formal tailored induction upon joining the Board is considered necessary. As the
Directors are all full-time employees of the Company they are fully committed to the Company and are able to allocate
suficient time to the Company in discharging their duties and responsibilities effectively. The Directors are encouraged
by the Board to receive any training they consider necessary to ensure they remain up-to-date with their skills, knowledge
and familiarity of the Company’s business and they remain aware of the risks associated with the Company and are also
aware of regulatory, legal, inancial and other developments to enable them to fulil their role effectively.
There is no formal system of performance evaluation of the Board or the Directors individually given the manner in which
the Board operates on a day to day basis.
The Company’s Articles of Association do not require that Directors retire by rotation, however, in accordance with
provision B.7.1 of the Code all Directors, with the exception of the Chairman, seek re-election at intervals of no more
than three years at the Annual General Meeting. Also in accordance with provision B.7.1 of the Code all new Directors
are subject to re-election at the irst Annual General Meeting following their appointment.
As the Company does not have a Remuneration Committee, the Chairman is responsible for ixing the remuneration
packages of the Directors which are based on their performance and the scope of their duties and responsibilities. No
Director has a service contract with the Company other than their initial employment contract and accordingly periods
of notice and termination payments are structured in accordance with Employment Law. There is no scheme in place
for a Director to receive entitlement to share options nor are there any long term incentive schemes. Full details of the
Company’s remuneration policy are given in the Directors’ Remuneration Report.
FINANCIAL AND BUSINESS REPORTING
The Directors have sole responsibility for the preparation of the Annual Report and Statement of Accounts which taken
as a whole is fair, balanced and understandable and provides the information necessary for the shareholders to assess the
Company’s performance, business model and strategy. The Directors are also solely responsible for the preparation of the
Interim Report and other price-sensitive public reports in a fair, balanced and understandable manner. The basis on which
the Company creates and preserves value over the long term is described in the business model within the Strategic Report.
In order to ensure that the Company and Group have adequate resources to ensure the continuing operations of the
Company and Group for the foreseeable future the Directors consider current and future trading, investment property
acquisitions and cash requirements. The Directors take account of prevailing market conditions in all areas of the Group’s
activities and use their knowledge and experience relating to the Group’s investment property portfolio. The Directors’
opinion is that the Company and Group have adequate inancial resources to allow the Company and Group to continue
in operational existence for the foreseeable future and therefore considers the adoption of the going concern basis as
appropriate for the preparation of the Accounts.
The Statement of Directors’ Responsibilities is set out on page 26.
17
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued)
31st JULY 2017
RISK MANAGEMENT AND INTERNAL CONTROL
The Board is responsible for and annually reviews the Group’s system of internal controls in relation to inancial,
operational, compliance and risk management to ensure their continued effectiveness. The systems adopted by the Board
are designed to manage the risk of failure to achieve the Company’s business objectives as opposed to eliminate them
as any system of control can only provide reasonable but not absolute assurance against material misstatement or loss.
The Board, in accordance with the Code, has reviewed the effectiveness of the internal controls from the commencement
of the accounting period to the date of approval of the Annual Report and Statement of Accounts. No signiicant failings
or weaknesses have been identiied in that period. There has also been a continual process of identiication by the
Directors of key areas of risk within the Group and appropriate action taken to mitigate and monitor such risks. The
Directors conirm that they have carried out a robust assessment of the principal risks facing the Group, as detailed in the
Strategic Report, including those which threaten the business model, future performance, solvency and liquidity of the
Group.
The main features of the Group’s internal control and risk management systems in relation to the inancial reporting
process are:
–
contracts, development projects, land purchases and acquisition of property, plant and equipment are
proceeded with after due consideration by the Directors;
monthly reports are prepared for each contract and development project for review by the Directors;
subsidiary Company reports are prepared for consideration by the Directors; and
treasury operations are carried out in accordance with policies and procedures already approved by
the Board.
−
−
−
AUDIT
As the Company does not have an Audit Committee, it is the responsibility of the Chairman and Company Secretary
on a continuing basis to consider how the inancial reporting and internal control principles apply to the Company, to
maintain an appropriate relationship with the Group’s Auditor and to review the scope and results of the audit and its cost
effectiveness. The Board is responsible for setting the remuneration of the Auditor.
Currently there are no proposals to undertake a retendering of the Company’s external audit function. The Company’s
external auditor has held ofice since 1975 and there has been no audit tender since that appointment. The Board continues
to assess the independence and effectiveness of the external audit function to ensure the integrity of the audit role provided
by the current external auditor on behalf of the shareholders. The Board also takes into account the external auditor’s own
policies and procedures regarding their integrity and independence including their procedures for rotation of audit partner
and senior staff and the professional standards they have to adhere to. At this time the Board has concluded that there is
no requirement to place the external audit function out to tender.
Mandatory rotation of the external auditor has become effective for all public limited companies following implementation
of an EU ruling which has become part of Companies Act 2006 via Statutory Instrument: The Statutory Auditors and
Third Country Auditors Regulations 2016. Given that our current external auditor has held ofice for over 20 years we
will be required to appoint a new external auditor for the audit of the Group’s accounts for the year ending 31st July 2020.
In order to ensure the continued independence and objectivity of the Group’s Auditor, the Board has established policies
regarding the provision of non-audit services by the Auditor. In some cases, the nature of the non-audit advice may make
it more timely and cost effective to select the Group’s Auditor, who already have a good understanding of the Group. In
other circumstances the decisions on the allocation of work are made on the basis of competence and cost effectiveness.
The Board has considered and for the time being has concluded that an internal audit function is not necessary. The Board
will continue to review the need for such a function. As such there is no internal audit of the risks identiied by the Board
and the controls established by the Board to mitigate and monitor these risks.
18
J. Smart & Co. (Contractors) PLC
CORPORATE GOVERNANCE (continued)
31st JULY 2017
SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
Given that there is no Audit Committee, it is the responsibility of the Board as a whole to consider areas of the inancial
statements where there are signiicant areas of judgement regarding estimates and assumptions, which in turn have a
signiicant effect on the amounts recognised in the inancial statements. In respect of the 2017 inancial statements these
areas were:
−
Investment Property Valuations – the valuation of the investment property portfolio is completed by the Directors.
The valuation of the property portfolio is inherently subjective and requires signiicant judgements and
assumptions to be made. The Directors appoint external valuers to value a sample of properties in the
portfolio to provide a sense check on their valuation. The valuations are discussed with the Auditors.
Long-Term Contract Valuations and Provisions – the Directors consider contract performance to ensure
appropriate revenue recognition. Future revenue and contract performance are considered and loss provisions
determined where necessary. Both costs and revenues may require to be revised as future events unfold
and uncertainties are resolved which would have a direct impact on overall performance of these contracts.
Retirement Beneit Surplus – the valuation of the retirement beneit obligation is dependent upon a series of
assumptions which are determined after the Directors take expert advice from the Group’s actuary. Changes in
these assumptions could have a material affect on the surplus disclosed in the inancial statements.
−
−
The Board discusses fully all issues relevant to the above areas and obtains where possible information and advice from
external experts and our external Auditors and only when fully satisied with the amounts associated with each area are
they incorporated into the inancial statements.
RELATIONS WITH SHAREHOLDERS
The Board has in the past and will in the future continue to enter into dialogue with the shareholders wherever possible.
The Chairman is responsible for ensuring that the views and concerns of the shareholders are communicated to the Board.
The Chairman is also responsible for discussing governance and strategy matters with the shareholders.
As the Company has no non-executive Directors there is no opportunity for shareholders to meet with these Directors.
All shareholders have an opportunity at the Annual General Meeting to participate in questions and answers with the
Board on matters relating to the Company.
At the Annual General Meeting separate resolutions will be proposed on each substantially separate issue and the number
of proxy votes received for, against, and withheld for each resolution will be announced.
SUBSTANTIAL SHAREHOLDERS
As at 31st July 2017 and 20th October 2017, excluding holdings of Directors, the Company has been notiied of the
following holdings of substantial voting rights in respect of the issued share capital of the Company:
Octet Investments Limited
.
A J Whitehead
.
.
.
.
.
.
.
.
.
.
.
.
.
Number
1,872,400
2,292,745
%
4.2
5.1
14th November 2017
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
18
19
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT
31st JULY 2017
ANNUAL STATEMENT
On behalf of the Board of Directors, I present the Directors’ Remuneration Report for the year ended 31st July 2017.
In addition to this statement the Report includes two other parts being the Policy Report and the Annual Report on
Remuneration, which have been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8
of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The
Report also meets the requirements of the UK Listing Authority’s Listing Rules and the Disclosure and Transparency
Rules.
The Policy Report has been developed taking account of the principles of the UK Corporate Governance Code 2016.
The shareholders approved the previous Policy at the 2014 Annual General Meeting and the policy was effective for three
years from that date.
The shareholders will be asked to approve the Policy at the 2017 Annual General Meeting and if approved will become
effective from that date and will be effective for three years.
The Annual Report on Remuneration will be subject to a vote at the 2017 Annual General Meeting. Our Auditor is
required to report to the shareholders on certain information contained in the Annual Report on Remuneration and that it
has been prepared in accordance with the Act and the Regulations. The information to be audited is appropriately marked.
There have been no substantial changes to Executive Directors’ remuneration in the year. Our policy continues to be to
provide remuneration packages that will retain and motivate the Directors to sustain the long term growth and value of
the Company.
14th November 2017
THE POLICY REPORT
DaviD w Smart
Chairman
As stated in the Corporate Governance Statement the Company does not appoint non-executive Directors and therefore the
Company does not have a Remuneration Committee to set the Executive Directors’ Remuneration Policy. The Chairman
fulils the function of the Remuneration Committee.
The Company’s remuneration policy is to provide remuneration packages that will retain and motivate the Directors to
sustain the long term growth and value of the Company and is based on the scope of their duties and responsibilities.
The Directors are not entitled to any performance related remuneration, long term incentive schemes or share options.
The remuneration of the Directors is not performance related therefore no element of their remuneration is based on
performance measures.
The policy table below summarises the main components of Directors’ Remuneration:
ELEMENT
PURPOSE AND STRATEGY
OPERATION
BASE SALARY
To pay a fair salary commensurate with the
individual’s role, responsibilities and experience.
Reviewed annually in July taking account of the
individual’s role and experience and the salary
increases of employees throughout the Group as a
whole. No maximum level is set.
20
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2017
ELEMENT
PURPOSE AND STRATEGY
OPERATION
BENEFITS
To provide support to enable the Directors to carry out
their duties effectively.
PENSION
To provide appropriate levels of retirement beneits.
Beneits include cash in lieu of a company car and
private medical insurance. No maximum level is set
as the costs of providing beneits luctuate over time;
however the costs are monitored to ensure they remain
reasonable.
Depending on when a Director irst became an
employee of the Company will determine whether they
are members of the Company’s Deined Beneit Pension
Scheme or Deined Contribution Scheme.
Company contributions to the Deined Beneit Scheme
are currently 27.8% of base salary. Contribution levels
are set in agreement between the scheme trustees and
the Company and can therefore vary from time to time.
Company contributions to the Deined Contribution
Scheme are currently a minimum of 10% of base salary.
The Chairman retains the right to make minor amendments to the above policy, to take account of regulatory, tax,
legislative or administrative changes without obtaining shareholder approval for these amendments.
No share options or long term incentive schemes are operated by the Company.
Directors are entitled to claim relevant expenses incurred by them in respect of their duties.
There are no provisions for the recovery of sums paid to Directors or the withholding of the payment of any sums to
Directors.
As all remuneration of Directors is ixed remuneration there is no need to illustrate, via a bar chart, the expected values of
proposed remuneration as it does not contain any elements based on performance and therefore is not subject to change
based on either the Company’s or Director’s performance.
APPROACH TO RECRUITMENT OF DIRECTORS
The Company’s approach to appointing new Executive Directors is to appoint from within the Company. As such the
remuneration of the Director has already been set by the Company and the package held by the employee prior to
appointment as a Director will remain in place. Consideration will be made of the increased duties and responsibilities
that will apply post appointment as a Director and revision to their base salary may be made to relect this.
SERVICE CONTRACTS AND POLICY ON CESSATION
No Director has a service contract with the Company, other than their initial employment contract and therefore periods
of notice and termination payments are structured in accordance with current Employment Law.
CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN COMPANY
The Chairman when considering the remuneration of the Executive Directors takes into account the remuneration
of employees across the Group as a whole. However, the Chairman does not consult directly with employees on the
remuneration of the Executive Directors but is mindful of salary increases which are applied across the Group as a whole.
20
21
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2017
CONSIDERATION OF SHAREHOLDER VIEWS
The Chairman considers all views and concerns he receives from shareholders especially at the Annual General Meeting
when shareholders have the opportunity to ask questions of the Board on all matters relating to the Company including
Directors’ Remuneration, or at any other time throughout the year.
Although no direct communication was held by the Chairman with major shareholders prior to shaping the Remuneration
Policy he believes that it is a responsible approach to remuneration and its policies in the past and for the future as
evidenced by the level of approval of the 2016 Directors’ Remuneration Report at the 2016 Annual General Meeting,
details of which are given in the Annual Report on Remuneration below.
ANNUAL REPORT ON REMUNERATION
The following provides details of how the remuneration policy was implemented in the year to 31st July 2017.
Single Total Figure of Remuneration for Executive Directors (Audited Information)
The following table presents the single igure for the total remuneration of each Executive Director for the year ended
31st July 2017 and the prior year:
Salary
£000
Taxable
Beneits
£000
.
.
90
.
.
.
.
6
.
.
.
.
.
.
6
.
.
.
.
96
.
.
.
.
.
.
96
.
.
.
.
53
.
.
.
.
.
.
.
.
88
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
79
105
107
104
107
104
107
104
26
–
7
10
10
10
10
10
10
10
2
–
Pension
£000
–
–
Total
£000
86
115
312 148
522
166
13
12
532
342
3
–
130
126
170
148
31
–
John M Smart
20171
.
.
2016
David W Smart
2017
2016
.
.
John R Smart
.
2017
.
2016
.
.
.
.
.
.
Alasdair H Ross 90
2017
2016
.
.
.
.
Patricia Sweeney
20173
2016
.
.
.
.
1. John M Smart retired as a Director on 27th April 2017.
2. Pension value represents the cash value of pension accrued over one year multiplied by 20 in line with new regulations with allowance for inlation and employee contributions.
3. Patricia Sweeney was appointed as a Director on 26th April 2017.
22
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2017
DIRECTORS’ PENSION ENTITLEMENTS (AUDITED INFORMATION)
David W Smart and Alasdair H Ross are members of the Company’s Deined Beneit Pension Scheme whilst
John R Smart and Patricia Sweeney are members of the Company’s Group Personal Pension Plan.
The Company’s Deined Beneit Pension Scheme was closed to new members in 2003. The normal date of retirement
based on the scheme rules is 65 and there is no automatic entitlement to early retirement. Contributions by the employer
under the scheme are 27.8% of pensionable salary.
Accrued pension
as at 31 July 2017
£000
32
42
Accrued pension
as at 31 July 2016
£000
30
38
David W Smart
Alasdair H Ross
.
.
.
.
.
.
.
.
.
.
.
.
.
.
SCHEME INTEREST AWARDS (AUDITED INFORMATION)
There were no scheme interests awarded in the year.
PAYMENTS TO PAST DIRECTORS (AUDITED INFORMATION)
No payments were made to past Directors in the year.
PAYMENTS FOR LOSS OF OFFICE (AUDITED INFORMATION)
No payments for loss of ofice were made to Directors in the year.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED INFORMATION)
The Company has no policy that Directors are required to own shares in the Company, although all Directors are currently
shareholders of the Company.
The interests of the Directors in the ordinary shares of the Company, including beneicial interests, are shown in the table
below:
Beneicial holdings
(including interests of the Director’s connected persons)
31 July 2017
31 July 2016
.
David W Smart
John R Smart
.
Alasdair H Ross .
Patricia Sweeney .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
11,863,500
11,863,500
100,000
50,000
11,863,500
11,863,500
100,000
100,00–
There have been no changes in any Directors’ beneicial holdings between the year end and 20th October 2017.
John M Smart retired as a Director on 27th April 2017. As at 1st August 2016 and 27th April 2017 he had a beneicial
holding of 1,198,500 Ordinary Shares of 2p in the Company.
23
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2017
PERFORMANCE GRAPH
The graph below shows a comparison of the total shareholder return for the Company’s shares for each of the last ive
inancial years against the total shareholder return for the companies comprised in the FTSE EPRA/NAREIT UK index
which the Company deems to be the most relevant to the Company as it includes companies in the same sector as the
Company.
The graph compares the value of £100 invested in J. Smart & Co. (Contractors) PLC, including re-invested dividends.
Total Shareholder Return over the last five financial years
£
200
150
100
50
0
J Smart & Co (Contractors) PLC
FTSE EPRA / NAREIT UK Index
2017
GROUP CHIEF EXECUTIVE OFFICER’S TOTAL REMUNERATION
The following table details the Chief Executive Oficer’s single igure of remuneration over the last ive inancial years:
2017
£000
148
86
David W Smart
John M Smart
2016
£000
166
115
2015
£000
165
115
2014
£000
207
119
2013
£000
184
133
GROUP CHIEF EXECUTIVE OFFICER’S CHANGE IN REMUNERATION
The following table compares the change in remuneration of the Group Chief Executive Oficer and that of the
remuneration of the Group’s salaried employees. This group of employees was chosen as it represents the most
comparable group.
Base salary
Taxable beneits
.
.
.
.
.
.
.
.
.
3 %
– %
6 %
– %
CEO
% change 2016-2017
Other employees
% change 2016-2017
24
J. Smart & Co. (Contractors) PLC
DIRECTORS’ REMUNERATION REPORT (continued)
31st JULY 2017
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table compares the total spend on remuneration of all employees of the Group, including Executive
Directors, and the total amounts paid in distributions to shareholders for the years to 31st July 2017 and 31st July 2016:
2017
£000
2016
£000
Difference in Difference as a
percentage
%
spend
£000
Remuneration of employees
Total distributions paid
(being dividends and share buy backs)
.
.
.
.
.
.
11,005
1,396
11,678 (673)
1,550 (154)
(6)
(10)
IMPLEMENTATION OF EXECUTIVE DIRECTOR REMUNERATION POLICY FOR 2018
After taking into consideration Group employees’ salary increases for the year to 31st July 2018, an increase of 3% of base
salary was awarded to all Directors, except for Patricia Sweeney who received a base salary increase of 6%.
Base salary from 1st July 2017
£
David W Smart
John R Smart
Alasdair H Ross
Patricia Sweeney
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
109,250
109,250
109,250
109,250
Base salary from 1st July 2016
£
106,500
106,500
106,500
103,500
CONSIDERATIONS BY THE DIRECTORS OF MATTERS RELATING TO DIRECTORS’ REMUNERATION
The Chairman is responsible for determining Directors’ Remuneration. No advice was sought in the year in considering
Directors’ Remuneration.
SUMMARY OF SHAREHOLDER VOTING AT THE 2016 ANNUAL GENERAL MEETING
The 2016 Directors’ Remuneration Report was put to the shareholders for their approval at the 2016 Annual General
Meeting. The resolution was passed on a show of hands.
Details of the proxy votes lodged, including those at the discretion of the Chairman, are as follows:
.
.
For
.
.
.
.
Against
Total votes cast (excluding votes withheld)
Votes withheld
.
.
Total votes cast (including votes withheld)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total number
of votes
26,314,160
4,000
26,318,160
–
26,318,160
.
.
.
.
.
% of votes cast
99
1
100
Votes withheld are not included in the proxy igures as they are not recognised as a vote in law.
14th November 2017
25
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
J. Smart & Co. (Contractors) PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
31st JULY 2017
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND STATEMENT OF ACCOUNTS
The Directors are responsible for preparing the Annual Report and the Group and Parent Company’s Statement of
Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company inancial statements for each inancial year.
Under that law they are required to prepare the Group inancial statements in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) and applicable law and have elected
to prepare the Parent Company inancial statements on the same basis.
Under company law the Directors must not approve the inancial statements unless they are satisied that they give a true
and fair view of the state of affairs of the Group and Parent Company and of their proit or loss for that period. In preparing
each of the Group and Parent Company inancial statements, the Directors are required to:
−
−
−
−
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRS as adopted by the EU; and
prepare the inancial statements on the going concern basis unless it is inappropriate to presume that
the Group and the Parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are suficient to show and explain the Group
and Parent Company’s transactions and disclose with reasonable accuracy at any time the inancial position of the Group
and Parent Company and enable them to ensure that its inancial statements comply with Companies Act 2006. They
have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing the Report of the Directors,
Strategic Report, Corporate Governance Statement and Directors’ Remuneration Report that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and inancial information included on
the Company’s website. Legislation in the UK governing the preparation and dissemination of inancial statements may
differ from legislation in other jurisdictions.
DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors conirms to the best of their knowledge:
−
the inancial statements, prepared in accordance with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, inancial position and proit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
the Report of the Directors and the Strategic Report include a fair review of the development and
performance of the business and the position of the Company and undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face; and
the Annual Report and Statement of Accounts taken as a whole are fair, balanced and understandable
and provide the information necessary for the shareholders to assess the Group’s business model,
performance and strategy.
−
−
14th November 2017
BY ORDER OF THE BOARD OF DIRECTORS
Patricia Sweeney
Company Secretary
26
27
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT
31st JULY 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF J. SMART & CO. (CONTRACTORS) PLC
OPINION
We have audited the inancial statements of J. Smart & Co. (Contractors) PLC for the year ended 31st July 2017 which
comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
and Company Statement of Changes in Equity, the Consolidated and Company Statement of Financial Position, the
Consolidated and Company Statement of Cash Flows and notes to the accounts, including a summary of signiicant
accounting policies. The inancial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by EU) and, as regards
the Parent Company inancial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
the inancial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31st July 2017 and of the Group’s proit for the year then ended;
the Group inancial statements have been properly prepared in accordance with IFRS as adopted by the EU;
the Parent Company inancial statements have been properly prepared in accordance with IFRS as adopted by the EU
and as applied in accordance with the provisions of the Companies Act 2006; and
the inancial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as
regards the Group inancial statements, Article 4 of the IAS Regulations.
•
•
•
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the inancial
statements section of our report. We are independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the inancial statements in the UK, including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is suficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK)
require us to report to you whether we have anything material to add or draw attention to:
•
the disclosures in the Annual Report set out on pages 12 and 13 that describe the principal risks and explain how they
are being managed or mitigated;
the Directors’ conirmation set out on page 18 in the Annual Report that they have carried out a robust assessment
of the principal risks facing the Group, including those that would threaten its business model, future performance,
solvency or liquidity;
the Directors’ statement, set out on page 8 in the inancial statements, about whether the Directors considered it
appropriate to adopt the going concern basis of accounting in preparing the inancial statements and the Directors’
identiication of any material uncertainties to the Group and the Parent company’s ability to continue to do so over a
period of at least twelve months from the date of approval of the inancial statements;
•
•
• whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with
•
Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
the Directors’ explanation set out on page 14 in the Annual Report as to how they have assessed the prospects of the
Group, over what period they have done so and why they consider that period to be appropriate, and their statement
as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to
any necessary qualiications or assumptions.
27
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued)
31st JULY 2017
CONCLUSIONS RELATING TO PRINCIPAL RISKS, GOING CONCERN AND VIABILITY STATEMENT (continued)
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s
and Company’s ability to continue as a going concern.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most signiicance in our audit of the
inancial statements of the current period and include the most signiicant assessed risks of material misstatement (whether
or not due to fraud) that we identiied. These matters included those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the inancial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
VALUATION OF THE INVESTMENT PROPERTY PORTFOLIO
As described in note 1 Accounting policies and estimation techniques and note 13 Investment Properties the Group carries
investment properties at the Directors’ estimate of fair value. As at 31st July 2017 the Group held investment properties
of £64,799,000.
Judgement is required by the Directors in terms of the assessment of the individual nature of each property, its location,
expected future rental income, tenure and tenancy proiles, prevailing market yields and comparable market conditions.
The valuation of investment properties requires signiicant judgement by management. Any input inaccuracies or
unreasonable bases used in these assumptions could result in a material misstatement in the inancial statements.
How we addressed the key audit matter
To obtain assurance over management’s assumptions applied in calculating the fair value of investment properties we
completed the following audit procedures among others:
•
testing the integrity of the information used by the Directors in completing the valuation including agreement on a
sample basis back to underlying leases;
• meeting with the Directors to challenge the valuation process, the performance of the portfolio and the signiicant
•
assumptions and critical judgement areas, including future income and yields; and
reviewing the results of a valuation completed by a third party valuer of a sample of the property portfolio, comparing
this to the Directors’ valuation and discussing the results with the Directors.
Based on our procedures, we noted no material exceptions and considered management’s key assumptions to be within
reasonable ranges.
CONTRACT ACCOUNTING ESTIMATES
As described in note 1 Accounting policies and estimation techniques, note 17 Trade and other receivables and note 19
Trade and other payables the Group carries amounts recoverable on contracts of £1,781,000 and contract loss provisions
of £609,000.
Judgement is required in preparing suitable estimates of the forecast costs and revenue on contracts. The Directors take
into account the estimated costs to complete and the percentage stage of completion of current contracts when determining
the recognition of proit or the requirement for a loss provision. An error in the contract outcome could result in a material
variance in the amount of proit or loss recognised to date and therefore also in the current period.
28
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued)
31st JULY 2017
KEY AUDIT MATTERS (continued)
CONTRACT ACCOUNTING ESTIMATES (continued)
How we addressed the key audit matter
substantive testing of contract revenues and costs;
To obtain assurance over management’s assumptions in calculating contract outcomes we completed the following audit
procedures among others:
•
• meeting with the Directors to challenge key judgements inherent in the forecast costs to complete that are crucial in
determining revenue and margin to be recognised and the identiication of loss making contracts and the quantum of
loss provisions; and
performing site visits and reviewing contract terms for key contracts.
•
Overall based on these procedures, we are satisied that contract balances are appropriately stated and that revenue and
contract results have been recorded appropriately.
PENSION SCHEME VALUATION
As described in note 1 Accounting policies and estimation techniques and note 26 Retirement beneit obligations the
Group has a deined beneit pension plan in the UK. At 31st July 2017, the Group recorded a net retirement beneit asset
of £3,862,000, comprising scheme assets of £37,888,000 and scheme liabilities of £34,026,000.
The pension valuation is dependent on market conditions and key assumptions made, in particular, relating to investment
returns, discount rate, inlation expectations and life expectancy assumptions.
The setting of these assumptions is complex and requires the exercise of signiicant management judgement with the
support of third party actuaries. Any unreasonable bases used in these assumptions could result in a material misstatement
in the inancial statements, refer to sensitivity analysis in note 26.
How we addressed the key audit matter
To obtain assurance over managements judgements in the determination of the pension scheme surplus we completed the
following audit procedures among others:
• we reviewed the key assumptions with management;
• we reviewed the key assumptions with the actuary;
• we benchmarked key assumptions against available empirical data;
• we reviewed the Directors assessment as to the recoverability of the pension surplus; and
• we also reviewed the disclosure of the pension scheme assumptions in the inancial statements.
Based on our procedures, we noted no material exceptions and considered management’s key assumptions to be within
reasonable ranges.
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements
on our audit and on the inancial statements. For the purposes of determining whether the inancial statements are free
from material misstatement we deine materiality as the magnitude of misstatements that makes it probable that the
economic decisions of a reasonably knowledgeable person relying on the inancial statements would be changed or
inluenced.
The materiality for the Group inancial statements as a whole was set at £548,000. This has been determined with
reference to a benchmark of Group total assets (of which it represents 0.5%) which we consider to be one of the principal
considerations for members of the Company in assessing the inancial position of the Group. We also considered the
overall property portfolio valuation and the extent and signiicance of the construction business in concluding on the
appropriate level of materiality.
28
29
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued)
31st JULY 2017
OUR APPLICATION OF MATERIALITY (continued)
We agreed with the Board of Directors to report to it all corrected and uncorrected misstatements we identiied through
our audit with a value in excess of £27,000, in addition to other audit misstatements below that threshold that we believe
warranted reporting on qualitative grounds.
There were no misstatements identiied during the course of our audit that were individually, or in aggregate, considered
to be material in terms of their absolute monetary value or on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The Group inancial statements are a consolidation of the seven trading entities including the parent entity and the Group’s
four joint ventures. Except for two of the joint ventures which are dormant all entities were audited to their own individual
materiality levels.
In establishing the overall approach to the Group audit, we obtained an understanding of the Group and its environment,
including group-wide controls, and assessed the risks of material misstatement at the Group level. This assessment
determined the type of audit work required to enable us to conclude whether suficient audit evidence had been obtained
as a basis for our opinion on the Group inancial statements.
There were no changes in the scope of our audit during the year.
Our audit work at Group level on the three areas highlighted in the key audit matters is described above.
In addition we assessed that the main risk from either fraud or irregularity with respect to the Group inancial statements
was the possibility of management override of controls.
In particular, we looked at where the Directors made subjective judgements, for example in respect of signiicant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We
also addressed the risk of management override of internal controls, including evaluating whether there was evidence of
bias by the Directors that represented a risk of material misstatement due to fraud.
OTHER INFORMATION
The other information comprises the information included in the Annual Report set out on pages 4 to 71 other than the
inancial statements and our Auditor’s report thereon. The Directors are responsible for the other information. Our opinion
on the inancial statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the inancial
statements, our responsibility is to read the other information and, in doing so consider whether the other information is
materially inconsistent with the inancial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the inancial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
30
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued)
31st JULY 2017
OTHER INFORMATION (continued)
In this context, we also have nothing to report in regard to our responsibility to speciically address the following items
in the other information and to report as uncorrected material misstatements of the other information where we conclude
that those items meet the following conditions:
• Fair, balanced and understandable - the statement given by the Directors on page 26 that they consider the Annual
Report and inancial statements taken as a whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s business model, performance and strategy, is materially inconsistent
with our knowledge obtained in the audit; or
• Audit committee reporting - the explanation set out on page 18 as to why the Annual Report does not include a
section describing the work of the audit committee is materially inconsistent with our knowledge obtained in the
audit; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’
statement, set out on page 16 to 19, required under the Listing Rules relating to the Company’s compliance with the
UK Corporate Governance Code containing provisions speciied for review by the auditor in accordance with Listing
Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance
Code.
OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• The information given in the Report of the Directors’ and the Strategic Report for the inancial year for which the
inancial statements are prepared is consistent with the inancial statements and those reports have been prepared in
accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and the Parent company and its environment obtained in the
course of the audit, we have not identiied material misstatements in:
• The Report of the Directors’ or the Strategic Report; or
• The information about internal control and risk management systems in relation to inancial reporting processes and
about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
•
adequate accounting records have not been kept by the Parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the Parent company inancial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration speciied by law are not made; or
• we have not received all the information and explanations we require for our audit.
•
30
31
J. Smart & Co. (Contractors) PLC
INDEPENDENT AUDITOR’S REPORT (continued)
31st JULY 2017
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Statement of Directors’ Responsibilities set out on page 26 the Directors are responsible for
the preparation of the inancial statements and for being satisied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of inancial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the inancial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the inancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to inluence the economic decisions of
users taken on the basis of these inancial statements.
A further description of our responsibilities for the audit of the inancial statements is located in the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF THIS REPORT
This report is made solely to the Company’s shareholders, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s shareholders those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a
body, for our audit work, for this report, or for the opinions we have formed.
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
We were appointed by the Directors to audit the inancial statements for the year ending 31st July 1975 and subsequent
inancial periods. The period of total uninterrupted engagement is 43 years, covering the years ending 31st July 1975 to
31st July 2017.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company
and we remain independent of the Group and the Parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the Board.
133 Finnieston Street
Glasgow
G3 8HB
14th November 2017
Paula galloway
Senior Statutory Auditor
for and on behalf of FRENCH DUNCAN LLP
Statutory Auditor and Chartered Accountants
32
J. Smart & Co. (Contractors) PLC
CONSOLIDATED INCOME STATEMENT
for the year ended 31st JULY 2017
Group construction activities
.
Less: Own construction work capitalised
.
REVENUE
Cost of sales
GROSS PROFIT
.
.
.
.
.
.
Other operating income .
Net operating expenses .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
OPERATING PROFIT BEFORE PROFIT ON SALE AND NET SURPLUS
ON VALUATION OF INVESTMENT PROPERTIES .
.
.
Proit on sale of investment properties .
Net surplus on valuation of investment properties
.
.
.
.
OPERATING PROFIT
Share of proits in Joint Ventures
.
Income from available for sale inancial assets
Proit on sale of available for sale inancial assets
.
Finance income .
.
.
.
.
.
PROFIT BEFORE TAX
Taxation
.
.
.
.
.
.
.
.
.
.
PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS
EARNINGS PER SHARE – BASIC AND DILUTED
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Notes
2017
£000
2016
£000
25,419
(2,559)
30,682
(1,655)
22,860
(19,406)
29,027
(25,260)
3,454
3,767
3
6,090
(6,925)
5,520
(6,095)
2,619
3,192)
613
614)
186
136)
5
14
6
7
3,846 3,514)
33
14
–
95 191
42
32
22
4,037
3,752
8
(310)
(264)
9 3,727 3,488
11 8.26p 7.61p
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
All activities in both the current and previous year relate to continuing operations.
33
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st JULY 2017
2017
£000
2016
£000
3,727 3,488
65)
(10)
65)
(10)
3,306)
(680)
(2,256)
215
2,626)
(2,041)
2,691) (2,051)
6,418 1,437)
6,418
1,437)
PROFIT FOR THE YEAR
.
.
.
.
.
.
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be subsequently reclassiied to Income Statement:
Fair value adjustment of available for sale inancial assets
.
TOTAL ITEMS WHICH MAY BE SUBSEQUENTLY
RECLASSIFIED TO INCOME STATEMENT .
.
.
.
.
.
.
Items that will not be subsequently reclassiied to Income Statement:
Actuarial gain/(loss) recognised in deined beneit pension scheme .
.
Deferred taxation on actuarial (gain)/loss
.
.
.
TOTAL ITEMS THAT WILL NOT BE SUBSEQUENTLY
RECLASSIFIED TO INCOME STATEMENT .
.
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)
.
.
.
.
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
ATTRIBUTABLE TO EQUITY SHAREHOLDERS
.
.
.
.
.
.
.
34
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 31st JULY 2017
Capital
Share Redemption
Reserve
Capital
£000
£000
Fair Value
Reserve
Retained
Total
Earnings
£000 £000 £000
At 1st August 2015
.
.
.
919
89 (46) 87,987
88,949
Proit for the year
.
Other comprehensive loss
TOTAL COMPREHENSIVE (LOSS) / INCOME
.
FOR THE YEAR
.
.
.
.
.
.
.
–
– 3,488 3,488
– – (10) (2,041) (2,051)
–
– – (10) 1,447) 1,437)
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled
.
Transfer to Capital Redemption Reserve
.
Dividends
(13)
–
–
–
13
–
.
.
.
–
–
–
(691)
(13)
(846)
(704)
–
(846)
TOTAL TRANSACTIONS WITH OWNERS .
(13)
13
–
(1,550)
(1,550)
At 31st July 2016 .
.
.
.
Proit for the year
Other comprehensive income
.
TOTAL COMPREHENSIVE INCOME
.
.
.
.
906
102
(56)
87,884
88,836
–
–
– –
–
65)
3,727
2,626)
3,727
2,691)
FOR THE YEAR
.
.
.
.
–
–
65)
6,353
6,418
2,436
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled
.
Transfer to Capital Redemption Reserve
.
Dividends
(10)
–
–
–
10
–
.
.
.
3,064
– (540)
(10)
–
(846)
–
(550)
–
(846)
TOTAL TRANSACTIONS WITH OWNERS .
(10)
10
–
(1,396)
(1,396)
At 31st July 2017 .
.
.
.
896
112
9)
92,841
93,858
35
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
as at 31st JULY 2017
Capital
Share Redemption
Reserve
£000
Capital
£000
Retained
Earnings
£000
Total
£000
919
89
12,279
13,287
At 1st August 2015
.
Proit for the year
.
Other comprehensive loss
.
.
.
.
.
.
.
.
.
–
–
–
–
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
– –
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
.
Shares purchased and cancelled
Transfer to Capital Redemption Reserve
.
Dividends
–
.
.
.
(13)
.
.
.
–
– 13
–
310)
(2,041)
(1,731)
310)
(2,041)
(1,731)
(691)
(13)
(846)
(704)
–
(846)
TOTAL TRANSACTIONS WITH OWNERS .
.
(13)
13
(1,550)
(1,550)
At 31st July 2016 .
.
Loss for the year
Other comprehensive income
.
.
.
.
.
.
.
. 906 102
8,998 10,006
.
.
– –
–
–
(410)
2,626)
(410)
2,626)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
–
–
2 ,216)
2,216)
TRANSACTIONS WITH OWNERS, RECORDED DIRECTLY IN EQUITY
Shares purchased and cancelled
.
Transfer to Capital Redemption Reserve
.
Dividends
(10)
–
–
.
.
.
.
.
.
–
10
–
(540)
(10)
(846)
(550)
–
(846)
TOTAL TRANSACTIONS WITH OWNERS .
. (10)
10
(1,396)
(1,396)
At 31st July 2017 .
.
.
.
. 896
112
9,818
10,826
36
37
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31st JULY 2017
NON-CURRENT ASSETS
Property, plant and equipment .
Investment properties
.
.
Investments in Joint Ventures
Available for sale inancial assets
.
Retirement beneit surplus
.
.
Deferred tax assets
.
CURRENT ASSETS
Inventories
.
Trade and other receivables
Monies held on deposit
Cash and cash equivalents
.
TOTAL ASSETS
.
.
NON-CURRENT LIABILITIES
.
Deferred tax liabilities
CURRENT LIABILITIES
Trade and other payables
Corporation tax liability
.
Bank overdraft
TOTAL LIABILITIES
NET ASSETS
.
.
.
EQUITY
Called up share capital
Capital redemption reserve
Fair value reserve
Retained earnings
.
.
.
TOTAL EQUITY
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Notes
12
13
14
15
26
21
16
17
18
18
21
19
22
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
1,431
64,799
305
1,000
3,862
58
2016
£000
1,382
64,728
263
326
33
41
71,455
66,773
2,881
5,723
2,536
26,524
2,684
6,369
5,519
26,785
37,664
41,357
109,119
108,130
1,923
1,389
4,385
162
8,791
5,134
143
12,628
13,338
17,905
15,261
19,294
93,858
88,836
896
112
9)
92,841
906
102
(56)
87,884
93,858
88,836
The inancial statements on pages 33 to 71 were approved by the Board of Directors and authorised for issue on
14th November 2017 and were signed on its behalf by:
DaviD w Smart
Director
Company Number SC025130
John r Smart
Director
37
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF FINANCIAL POSITION
as at 31st JULY 2017
NON-CURRENT ASSETS
Property, plant and equipment .
.
Investments in Subsidiaries and Joint Ventures
.
Retirement beneit surplus
.
.
.
CURRENT ASSETS
.
Inventories
Trade and other receivables
Current tax asset .
Cash and cash equivalents
.
.
TOTAL ASSETS
.
.
NON-CURRENT LIABILITIES
.
Deferred tax liabilities
CURRENT LIABILITIES
Trade and other payables
.
Bank overdraft
TOTAL LIABILITIES
NET ASSETS
.
.
.
EQUITY
Called up share capital
Capital redemption reserve
Retained earnings
.
.
TOTAL EQUITY
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Notes
12
14
26
16
17
18
21
19
22
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
743
708
3,862
2016
£000
853
708
33
5,313
1,594
2,576
6,383
529
–
9,488
2,406
6,009
522
2,948
11,885
14,801
13,479
719
80
3,038
218
3,393
–
3,256
3,393
3,975
3,473
10,826
10,006
896
112
9,818
906
102
8,998
10,826
10,006
The inancial statements on pages 33 to 71 were approved by the Board of Directors and authorised for issue
on 14th November 2017 and were signed on its behalf by:
DaviD w Smart
Director
Company Number SC025130
John r Smart
Director
38
J. Smart & Co. (Contractors) PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31st JULY 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Tax (paid)/received
.
.
.
.
.
NET CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
CASH FLOWS FROM INVESTING ACTIVITIES
.
Additions to property, plant and equipment
Additions to investment properties
.
Expenditure on own work capitalised - investment properties
.
.
.
Sale of property, plant and equipment .
.
.
Sale of investment properties
.
.
.
Purchase of available for sale inancial assets
.
.
Proceeds of sale of available for sale inancial assets
.
.
Decrease/(increase) in monies held on deposit
.
.
.
Interest received .
.
.
.
.
Dividend received from Joint Ventures .
.
.
NET CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares .
.
Dividends paid
.
.
.
.
.
.
.
NET CASH FLOWS FROM FINANCING ACTIVITIES
INCREASE IN CASH AND CASH EQUIVALENTS .
.
.
.
.
.
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
.
.
.
.
.
.
Notes
. 23 (a)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
2,205
2016
£000
5,197
(454)
634)
1,751
5,831)
(487)
(20)
(2,559)
70
3,735
(674)
(8787)
2,983)
86
–
(488)
(45)
(1,655)
70
525
–)
1
(2,017)
125
37
3,221)
(3,447)
(550)
(846)
(704)
(846)
(1,396)
(1,550)
3,576
834
. 23 (b)
14,157
13,323
CASH AND CASH EQUIVALENTS AT END OF YEAR
.
.
. 23 (b)
17,733
14,157
38
39
J. Smart & Co. (Contractors) PLC
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31st JULY 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Tax received
.
.
.
.
.
.
NET CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
Sale of property, plant and equipment .
.
Interest received .
Dividend received from Joint Ventures
.
.
.
.
.
.
NET CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares .
.
Dividends paid
.
.
.
.
.
.
.
NET CASH FLOWS FROM FINANCING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
.
Notes
2017)
£000)
2016)
£000)
. 24 (a)
(1,890)
1,087)
.
.
.
.
.
.
.
.
.
.
.
213)
1,084)
(1,677)
2,171)
(122)
24
5
–)
(286)
59)
12)
37)
(93)
(178)
(550)
(846)
(704)
(846)
(1,396)
(1,550)
(3,166)
443)
. 24 (b)
2,948)
2,505)
. 24 (b)
(218)
2,948)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
40
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES
GENERAL INFORMATION
J. Smart & Co. (Contractors) PLC which is the ultimate Parent Company of the J. Smart & Co. (Contractors) PLC
Group is a public limited company registered in Scotland, incorporated in the United Kingdom and listed on the
London Stock Exchange.
STATEMENT OF COMPLIANCE
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) and
the
International Financial Reporting Interpretations Committee (IFRIC) Interpretations endorsed by
European Union (EU) and with those parts of the Companies Act 2006 applicable to companies reporting under
IFRS.
STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS EFFECTIVE IN THE YEAR TO 31st JULY 2017
The following new standards and amendments to standards and interpretations relevant to the Group have
been issued by the International Accounting Standards Board and are mandatory for the irst time for the
inancial year to 31st July 2017 but had no material impact on the inancial statements:
• IAS 1 (amended): Presentation of inancial statements.
• IAS 19 (amended): Employee Beneits.
NEW STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS NOT YET APPLIED
The following new standards, amendments to standards and interpretations relevant to the Group have been issued
by the International Accounting Standards Board but are not yet effective for the Group at the date of these
inancial statements, and have not been adopted early:
• IFRS 9: Financial Instruments (effective in the year ending 31st July 2019).
• IFRS 15: Revenue from Contracts with Customers (effective in the year ending 31st July 2019).
• IFRS 16: Leases (effective in the year ending 31st July 2020).
• IAS 7 (amended): Statement of Cash Flows (effective in the year ending 31st July 2018).
• IAS 12 (amended): Income Taxes (effective in the year ending 31st July 2018).
The Directors are to fully consider the implications and impact on the inancial statements of these Standards,
especially IFRS 15 and IFRS 16. Based on our review to date no material transitional impact has been
identiied as at 31st July 2017 in respect of IFRS 9 or IFRS 15.
BASIS OF PREPARATION
The accounts have been prepared on a going concern basis and under the historical cost convention except
where the measurement of balances at fair value is required as noted below for investment properties, available
for sale inancial assets and assets held by the deined beneit pension scheme.
The accounting policies set out below have been consistently applied to all periods presented in these accounts.
The preparation of inancial statements requires management to make estimates and assumptions concerning
the future that may affect the application of accounting policies and the reported amounts of assets and
liabilities and income and expenses. Management believes that the estimates and assumptions used in the
preparation of these accounts are reasonable. However, actual outcomes may differ from those anticipated.
40
41
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
INVESTMENT PROPERTIES
Investment properties are revalued annually by the Directors in accordance with the RICS Valuation Standards.
The valuations are subjective due to, among other factors, the individual nature of the property, its location and the
expected future rental income. As a result, the valuation of the Group’s investment property portfolio incorporated
into the inancial statements is subject to a degree of uncertainty and is made on the basis of assumptions which
may prove to be inaccurate, particularly in periods of volatility or low transaction low in the property market.
The assumptions used by the Directors are market standard assumptions in accordance with the RICS Valuation
Standards and include matters such as tenure and tenancy details, ground conditions of the properties and their
structural conditions, prevailing market yields and comparable market conditions. If any of the assumptions used
by the Directors prove to be incorrect this could result in the valuation of the Group’s investment property portfolio
differing from the valuation incorporated into the inancial statements and the difference could have a material
effect on the inancial statements.
LONG-TERM CONTRACT PROVISIONS
Judgement is required in the area of provisions for losses on long-term contracts. The Directors take into account
the estimated costs to complete and the percentage stage of completion of current contracts when determining the
provision for losses. The Directors consider adequate, but not excessive provisions have been made in this respect.
RETIREMENT BENEFIT OBLIGATION
The valuation of the retirement beneit obligation is dependent upon a series of assumptions, mainly discount rates,
mortality rates, investment returns, salary inlation and the rate of pension increases, which are determined after
taking expert advice from the Group’s Actuary. If different assumptions were used then this could materially affect
the results disclosed in the inancial statements. These are set out in note 26 to the Accounts.
BASIS OF CONSOLIDATION
The Group accounts consolidate the accounts of J. Smart & Co. (Contractors) PLC and all of its Subsidiaries
made up to 31st July each year. Subsidiaries are entities controlled by the Company. Control is assumed where the
Company has the power to govern the inancial and operating policies of an entity so as to obtain beneits from its
activities.
Intra-group balances and any income or expenses arising from intra-group transactions are eliminated in
preparing the Group accounts.
No Income Statement is presented for the Parent Company as provided by section 408 of the Companies Act 2006.
BUSINESS COMBINATIONS AND GOODWILL
Subsidiaries acquired in the year are accounted for using the acquisition method of accounting. Identiiable
assets acquired and liabilities assumed are measured at their fair values at the acquisition date. The consideration
transferred for the acquisition is the fair value of the assets given, equity instruments issued and liabilities incurred
or assumed at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of
the identiiable net assets acquired is recorded as goodwill.
42
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
INVESTMENT IN JOINT VENTURES
Joint Ventures are those entities over which the Company has a 50% holding and exercises joint control
under a contractual arrangement. The results of Joint Venture undertakings are accounted for using the
equity method of accounting. Under this method the investment is initially recorded at cost and is subsequently
adjusted to relect the Group’s share of the net proit or loss in the Joint Venture.
The Accounts of the Group’s Joint Ventures have been prepared in accordance with UK GAAP. The Group’s
interest in the assets and liabilities of the Joint Ventures have only been restated in accordance with International
Financial Reporting Standards where such restatement is considered material to an understanding of the Group’s
interest.
CAPITAL MANAGEMENT
Group objectives in managing capital are to safeguard the interests of the Company to operate as a net
debt free going concern, of its employees to maintain wherever possible security of employment, remuneration
and retirement provisions and of its shareholders to maintain continuity of dividends and stability of share price.
The capital structure of the Group consists of issued share capital, reserves and retained earnings represented
predominantly by investment properties, working capital and cash.
These assets are purchased, managed and maintained by the Group’s management and employees, advised
where appropriate by independent outside professionals. Refer to pages 12 and 13 of this report for details of
relevant risk factors and management measures.
The Group has suficient cash reserves and readily realisable assets available to meet its foreseeable commitments.
INVESTMENT PROPERTIES
Investment properties are properties, either owned by the Group or where the Group is a lessee under a inance
lease, which are held for long-term rental income or for capital appreciation or both. Also, properties held under
operating leases are accounted for as investment properties when the rest of the deinition of an investment property
is met.
Investment properties, whether completed or under development, are initially recognised at cost and revalued at the
Balance Sheet date to fair value as determined by the Directors in accordance with the RICS Valuation Standards.
Gains or losses arising from the changes in fair value are included in the Income Statement in the year in which
they arise. In accordance with IAS 40: Investment Property, as the Group uses the fair value model, no depreciation
is provided in respect of investment properties including integral plant.
Additions to investment properties consist of costs of a capital nature and, in the case of investment properties
under development, includes certain internal staff and associated costs directly attributable to the management of
the developments under construction.
PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are stated at cost less accumulated depreciation.
Subsequent costs are included in the asset’s carrying value or recognised as a separate asset, as appropriate, only
when it is probable that future economic beneits associated with the item will low to the Group and the cost of
them can be measured reliably. All other repairs and maintenance expenditure is charged to the Income Statement
as incurred.
43
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
DEPRECIATION
Depreciation is provided on all items of property, plant and equipment, other than investment properties and
freehold land, at rates calculated to write off the cost of each asset over its expected useful life, as follows:
Freehold buildings
Plant and machinery
Ofice furniture and ittings
Motor vehicles
- over 40 to 66 years
- 25% to 33 1⁄3% reducing balance
- 20% to 33 1⁄3% reducing balance
- 33 1⁄3% reducing balance
IMPAIRMENT REVIEWS
PROPERTY, PLANT AND EQUIPMENT
Individual assets are grouped for impairment assessment purposes at the lowest level at which there are identiiable
cash inlows independent of the cash inlows of other groups of assets.
The Group assesses at each Balance Sheet date whether there is an indication that an asset may be impaired. If an
indication exists the Group makes an estimate of the recoverable amount of each asset group, being the higher of
its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not
generate cash inlows that are largely independent of those from other assets or groups of assets. An impairment
loss is recognised where the recoverable amount is lower than the carrying value of assets.
If there is an indication that previously recognised impairment losses may have decreased or no longer exist, a
reversal of the loss may be made. The carrying amount of the asset is increased to its recoverable amount only up
to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for
the asset in prior years.
Impairment losses and any subsequent reversals are recognised in the Income Statement.
INVENTORIES AND WORK IN PROGRESS
Inventories are valued at the lower of cost and net realisable value.
Land held for development is included at the lower of cost and net realisable value.
Work in progress is valued at the lower of cost and net realisable value.
Cost includes materials, on a irst-in irst-out basis and direct labour plus attributable overheads based on normal
operating activity, where applicable. Net realisable value is the estimated selling price less anticipated disposal
costs.
Variations and claims are included in Revenue where it is probable that the amount, which can be measured
reliably, will be recovered from the customer.
LONG-TERM CONTRACTS
Amounts recoverable on contracts which are included in debtors are stated at cost as deined above, plus attributable
proit to the extent that this is reasonably certain after making provision for maintenance costs, less any losses
incurred or foreseen in bringing contracts to completion, and less amounts received as progress payments.
For any contracts where receipts exceed the book value of work done, the excess is included in trade and other
payables as payments on account.
INCOME TAX
The charge for current UK corporation tax is based on results for the year as adjusted for items that are non-
assessable or disallowed and any adjustments for tax payable in respect of previous years. It is calculated using
rates that have been enacted or substantially enacted at the Balance Sheet date.
44
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
DEFERRED TAXATION
Deferred tax is provided using the liability method in respect of temporary differences between the carrying value
of assets and liabilities in the inancial statements and the corresponding tax bases used in the computation of
taxable proit. Deferred tax is provided on all temporary differences. The measurement of deferred tax relects the
tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to
recover or settle the carrying amounts of its assets and liabilities for Investment Properties that are measured at
fair value.
Deferred tax is determined using tax rates that have been enacted or substantially enacted by the Balance Sheet
date and are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. It is
recognised in the Income Statement except when it relates to items credited or charged directly to Equity, in which
case the deferred tax is also dealt with in Equity.
Deferred tax assets are recognised to the extent that it is probable that future taxable proits will be available
against which the temporary differences can be utilised.
PENSIONS
The Group operates a deined beneit pension scheme, which was closed to new members during the year
to 31st July 2003 and which requires contributions to be made to an administered fund.
The obligations of the scheme represent beneits accruing to employees and are measured at discounted
present value while scheme assets are measured at their fair value. The discount rate used is the yield on
AA credit rated corporate bonds that have maturity dates approximating to the terms of the Group’s obligations.
The calculation is performed by a qualiied actuary using the projected unit credit method.
The operating and inancial costs of such plans are recognised separately in the Income Statement, service
costs are spread systematically over the working lives of the employees concerned and inancing costs are recognised
in the year in which they arise. Actuarial gains and losses are recognised immediately in the Consolidated Statement
of Comprehensive Income.
The Group also operates a deined contribution Group Personal Pension Plan for eligible employees. The plan is
externally administered and professionally managed. Contributions payable are expensed to the Income Statement
as incurred.
LEASES
Leases are classiied according to the substance of the transaction. A lease that transfers substantially all
the risks and rewards of ownership to the lessee is classiied as a inance lease. All other leases are classiied as
operating leases.
GROUP AS A LESSEE
In accordance with IAS 40: Investment Property, leases of investment property are assessed on a property
by property basis. Where future rentals are material, the properties are capitalised and treated as inance leases
in accordance with IAS 17: Leases, otherwise properties are classiied as operating leases and rentals payable are
charged to the Income Statement on a straight line basis over the term of the lease.
Other leases are classiied as operating leases and rentals payable are charged to the Income Statement on a straight
line basis over the term of the lease.
GROUP AS A LESSOR
Properties leased out under operating leases are included in investment property, with rental income recognised on
a straight line basis over the lease term.
45
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
REVENUE
Revenue, which is stated net of value added tax, represents the invoiced value of goods sold, except in the case
of long-term contracts where revenue represents the amounts received and receivable for work done in the year.
The measurement and stage of completion of long-term contracts are based on valuations agreed with third party
surveyors.
Proits on long-term contracts are calculated in accordance with International Financial Reporting Standards and
do not relate directly to revenue. Proit on current contracts is only taken at a stage near enough to completion
for that proit to be reasonably certain after making provision for contingencies, whilst provision is made for all
losses incurred to the accounting date together with any further losses that are foreseen in bringing contracts to
completion. The value of construction work transferred to investment properties is excluded from revenue.
Revenue from investment properties comprises rental income, service charges, insurance receivable and other
recoveries, and is disclosed as other operating income in the Income Statement.
Rental income from investment property leased out under an operating lease is recognised in the Income Statement
on a straight line basis over the term of the lease.
Revenue from private housing sales is recognised when transactions are legally completed.
Revenue from private housing sales under shared equity scheme are accounted for at fair value.
FINANCIAL INSTRUMENTS
Financial assets and inancial liabilities are recognised in the Group’s Statement of Financial Position when the
Group becomes a party to the contractual provision of the instrument. The principal treasury objective is to provide
suficient liquidity to meet operational cash requirements. The Group operates controlled treasury policies which
are monitored by the Board to ensure that the needs of the Group are met as they arise.
AVAILABLE FOR SALE FINANCIAL ASSETS
Available for sale inancial assets represent investments in quoted shares which are recognised at fair value at the
year end. The movement in fair value is transferred directly to Equity and shown in a separately designated Fair
Value Reserve.
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised at invoiced value less provisions for impairment. A provision for
impairment of trade receivables is established where there is objective evidence that the Group will not be able to
collect all amounts due according to the terms of the receivables concerned.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand, deposits with banks and other short-term highly liquid
investments with original maturities of three months or less. For the Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as deined above, net of outstanding bank overdrafts.
MONIES HELD ON DEPOSIT
Monies held on deposit with original maturity dates exceeding three months are disclosed separately in the
Statement of Financial Position. As these monies originated from investing activities any movements in the year
on these monies are disclosed under Investing Activities in the Statement of Cash Flows.
TRADE AND OTHER PAYABLES
Trade and other payables are non-interest bearing and are recognised at invoiced amount.
46
47
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
1.
ACCOUNTING POLICIES AND ESTIMATION TECHNIQUES (continued)
MEASUREMENT OF FAIR VALUES
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both
inancial and non-inancial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the
fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value
hierarchy as the lowest level input that is signiicant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during
which a change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
• Note 13 – Investment Properties;
• Note 15 – Available for Sale Financial Assets;
• Note 20 – Financial Instruments;
• Note 26 – Retirement Beneit Obligations.
DIVIDENDS
Final Dividends are recognised as a liability in the year in which they are approved by the Company’s shareholders.
Interim Dividends are recognised when they are paid.
47
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
2.
SEGMENTAL INFORMATION
IFRS 8: Operating Segments requires operating segments to be identiied on the basis of internal reporting about
components of the Group that are regularly reviewed by the chief operating decision maker to allow the allocation
of resources to the segments and to assess their performance. The chief operating decision maker has been identiied
as the Board of Directors.
All revenue arises from activities within the UK and therefore the Board of Directors does not consider the business
from a geographical perspective. The operating segments are based on activity and performance of an operating
segment is based on a measure of operating results.
External
Revenue
£000)
22,860)
6,090)
Internal
Revenue
£000)
2,559)
–)
Total
Revenue
£000)
25,419)
6,090)
Operating
Proit / (Loss)
2017)
£000)
(673)
4,519)
2016)
£000)
–)
–)
28,950)
2,559)
31,509)
3,846)
–)
2017
Construction activities
Investment activities
2016
Construction activities
Investment activities
.
.
.
.
.
.
.
.
29,027)
5,520)
1,655)
–)
30,682)
5,520)
34,547)
1,655)
36,202)
OPERATING PROFIT
.
Share of results of Joint Ventures
Finance and investment income
.
.
.
.
.
.
.
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
–)
–)
–)
3,846
42
149)
4,037)
(102)
3,616)
3,514)
3,514)
33)
205)
3,752)
Internal revenue relates to own work capitalised, all other internal transactions are eliminated on consolidation.
The Group had sales from construction activities from three customers amounting to £14,404,000 (2016, sales
from construction activities from two customers amounting to £14,467,000).
48
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
2.
SEGMENTAL INFORMATION (continued)
OTHER SEGMENTAL INFORMATION
2017
Construction activities
Investment activities
Joint Ventures
.
.
.
.
.
.
.
.
.
.
Allocation of corporation tax debtor
.
2016
Construction activities
Investment activities
Joint Ventures
.
.
.
.
.
.
.
.
.
.
Allocation of corporation tax debtor
.
3.
OTHER OPERATING INCOME
Rental income
Service charges and insurance receivable
.
.
.
Direct property costs
Net rental income
.
.
.
.
.
.
Non-Current
Asset Additions Depreciation
£000
£000
Segment
Segment
Assets Liabilities
£000
£000
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
316)
2,750)
–)
388)
19)
–)
16,606)
92,790)
305)
4,797)
11,046)
–)
109,701)
15,843)
.
.
.
.
(582)
(582)
109,119)
15,261)
488)
1,700)
–)
465)
–)
–)
16,860)
91,561)
263)
4,749)
15,099)
–)
.
.
.
.
(554)
(554)
108,684)
19,848)
108,130)
19,294)
2017)
£000)
2016)
£000
5,515)
575)
4,994)
526)
6,090)
5,520)
(2,653) (2,164)
3,437)
3,356)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Direct property costs included £1,258,000 (2016, £914,000) in respect of investment properties that did not
generate rental income in the year.
48
49
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
4.
STAFF COSTS AND DIRECTORS’ REMUNERATION
Staff costs during the year amounted to:
Wages, salaries and short term beneits.
.
.
Social security costs
.
Post-employment beneits
.
.
. .
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
The average weekly number of employees during the year was made up as follows:
Construction and related services.
Ofice and management .
.
Directors’ remuneration:
– Salaries and short term beneits
.
– Post-employment beneits
.
.
.
.
. .
. .
. .
. .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017)
£000)
2016)
£000)
9,032)
966)
1,007)
9,784)
1,051)
843)
11,005)
11,678)
No.)
No.)
235)
25)
275)
23)
260)
298)
£000)
465)
72)
£000)
457)
59)
537)
516)
David W Smart and Alasdair H Ross are members of the Group’s deined beneit pension scheme.
John R Smart and Patricia Sweeney are members of the Group’s deined contribution Group Personal Pension Plan.
Key management is comprised solely of the Directors of the Company. Full details of Directors’ remuneration is
given in the Directors’ Remuneration Report on pages 20 to 25.
5.
OPERATING PROFIT
This is stated after charging/(crediting):
.
Cost of inventories recognised as an expense .
. .
.
Staff costs (per note 4) .
. .
.
Hire of plant and machinery
. .
Contingent rents .
.
.
. .
Depreciation of owned assets
Proit on disposal of property, plant and equipment
.
Auditor remuneration and expenses – audit services .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
The audit fees for the Parent Company are £50,000 (2016, £50,000).
6.
INCOME FROM INVESTMENTS
Dividend income from available for sale inancial assets
.
7.
FINANCE INCOME
.
)
Income:
Interest on short term deposits .
.
.
Other interest
.
.
Net interest income on retirement beneit obligations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2,044)
11,005)
721)
83)
407)
(39)
112)
7,074)
11,678)
651)
75)
465)
(47)
104)
32)
14
79)
7)
9)
111)
14)
66)
95)
191)
50
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
8.
TAXATION
UK Corporation Tax
Current tax on income for the year
Corporation tax under/(over) provided in previous years
.
.
.
Deferred taxation (note 21)
.
.
Current Tax Reconciliation
Proit on ordinary activities before tax .
.
Share of proits of Joint Ventures
.
.
.
.
.
.
.
.
.
.
.
.
.
Current tax at 19.67% (2016, 20.00%) .
Effects of:
Expenses not deductible for tax purposes
Other timing differences
Non taxable income including revaluation surplus
Effect of indexation allowances on property sales
Effect of change in tax rate
.
Adjustments to corporation tax charge in respect of prior years
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
.
.
.
.
.
.
.
.
.
.
2017)
£000)
2016)
£000)
472)
1)
512)
(8)
473)
504)
(163)
(240)
310)
264)
4,037)
(42)
3,752)
(33)
3,995)
3,719)
786)
744)
34)
–
(127)
(185)
(199)
1)
6)
10)
(67)
–)
(421)
(8)
310)
264)
The Finance (No.2) Act 2015, which received Royal Assent on 18th November 2015, reduced the UK corporation
tax rate to 19% for inancial years commencing 1st April 2017 to 1st April 2019 and to 18% for inancial years
commencing 1st April 2020. The Finance Act 2016, which received Royal Assent on 15th September 2016,
reduced the rate to 17% for inancial years commencing 1st April 2020.
The effective corporation tax rate is 19.67% (2016, 20.00%) being the average rate applicable over the period.
Deferred tax provisions have been calculated using the 17% rate.
In addition to amounts charged to the Income Statement, a deferred tax charge of £680,000 (2016, credit £215,000)
relating to actuarial gains/(losses) on the deined beneit pension scheme has been recognised directly to Equity.
The value of the deferred tax asset in respect of capital losses not recognised in the inancial statements amounted
to £774,000 (2016, £1,340,000).
There are no income tax consequences attached to dividends paid or proposed by the Company to its shareholders.
50
51
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
9.
PROFIT FOR THE FINANCIAL YEAR
Dealt with in the accounts of the Parent Company
.
Retained by Subsidiary and Joint Venture Companies
.
.
.
.
.
.
.
.
)2017)
£000)
2016)
£000)
(410)
4,137)
(310)
3,178
3,727)
3,488)
The Group uses underlying proit before tax as an alternative performance measure, which is the proit before tax
excluding net surplus or deicit on valuation of investment properties accounted for through the Income Statement.
As the net surplus or deicit on valuation of investment properties can luctuate from year to year and is not a
realised surplus or loss by excluding this amount a truer relection of actual Group performance is obtained.
Analysis of this alternative performance measure is as follows:
.
Proit before tax
Surplus on valuation of investment properties
.
.
.
.
.
10.
DIVIDENDS
2015 Final Dividend of 2.10p per share, after waivers
.
2016 Interim Dividend of 0.92p per share
2016 Final Dividend of 2.15p per share, after waivers
.
2017 Interim Dividend of 0.95p per share
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4,037)
(614)
(3,752)
(136)
3,423)
3,616)
)
–)
–)
418)
428)
425)
421)
–)
–)
846)
846)
The Board is proposing a Final Dividend of 2.17p per share (2016, 2.15p) which, will cost the Company no more
than £973,000.
The proposed Final Dividend is subject to approval by the shareholders at the Annual General Meeting and has not
been included as a liability in these inancial statements.
11.
EARNINGS PER SHARE
Proit)
attributable)
to Equity)
shareholders)
£000)
Basic)
Earnings)
per share)
Year to 31st July 2017
.
Year to 31st July 2016
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3,727)
8.26p
3,488)
7.61p
Basic earnings per share are calculated by dividing the proit attributable to equity shareholders by the weighted
average number of shares in issue during the year.
The weighted average number of shares for the year to 31st July 2017 amounted to 45,099,000 (2016, 45,845,000).
There is no difference between basic and diluted earnings per share.
52
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
12.
PROPERTY, PLANT AND EQUIPMENT
(a) GROUP
Cost:
At 1st August 2016
Additions
Disposals
.
.
At 31st July 2017
.
.
.
.
Depreciation:
At 1st August 2016
.
Provided during year .
.
Disposals
.
At 31st July 2017
Net book value:
At 31st July 2017
Cost:
At 1st August 2015
Additions
Disposals
.
.
At 31st July 2016
.
.
.
.
.
.
Depreciation:
.
At 1st August 2015
Provided during year .
.
Disposals
.
At 31st July 2016
Net book value:
At 31st July 2016
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Land and
buildings
Freehold
£000
Plant,)
equipment)
and vehicles)
£000)
Total)
£000)
896
–
–
5,920)
487)
(472)
6,816)
487
(472)
896
5,935)
6,831)
553
19
–
4,881)
388)
(441)
5,434)
407)
(441)
572
4,828)
5,400)
324
1,107)
1,431)
896
–
–
5,760)
488)
(328)
6,656)
488)
(328)
896
5,920)
6,816)
534
19
–
4,740)
446)
(305)
5,274)
465)
(305)
553
4,881)
5,434)
343
1,039)
1,382)
Included within Freehold Land and Buildings is land costing £13,000 (2016, £13,000) which is not depreciated.
53
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
Plant,)
Land and)
buildings)
equipment)
Freehold) and vehicles)
£000)
£000)
Total)
£000)
361)
–)
–)
2,729)
122)
(105)
3,090)
122)
(105)
361)
2,746)
3,107)
115)
5)
–)
120)
2,122)
214)
(92)
2,237)
219)
(92)
2,244)
2,364)
241)
502)
743)
.
.
.
.
.
.
.
.
.
.
.
.
.
361)
–)
–)
–)
2,719)
286)
(230)
(46)
3,080)
286)
(230)
(46)
.
.
.
.
.
.
.
361)
2,729)
3,090)
110)
5)
–)
–)
2,113)
265)
(216)
(40)
2,223)
270)
(216)
(40)
115)
2,122)
2,237)
246)
607)
853)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
12.
PROPERTY, PLANT AND EQUIPMENT (continued)
(b) COMPANY
Cost:
At 1st August 2016
Additions
Disposals
.
.
At 31st July 2017
.
.
.
.
Depreciation:
At 1st August 2016
.
Provided during year .
.
Disposals
.
At 31st July 2017
)
Net book value:
At 31st July 2017
Cost:
At 1st August 2015
Additions
.
Disposals
.
Group transfers
At 31st July 2016
.
.
.
.
.
.
.
Depreciation:
At 1st August 2015
.
Provided during year .
.
.
Disposals
.
Group transfer s
At 31st July 2016
Net book value:
At 31st July 2016
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
54
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
13.
INVESTMENT PROPERTIES
Cost or valuation:
.
At 1st August 2016
.
Additions
Disposals
.
Surplus on valuation
.
.
At 31st July 2017
.
.
.
.
.
.
Cost or valuation:
At 1st August 2015
Additions
Disposals
.
.
.
.
.
(Deicit)/surplus on valuation
.
.
.
At 31st July 2016
.
.
Land and)
buildings)
Freehold)
£000)
56,630)
1,326)
(3,122)
610)
Land and)
buildings)
Leasehold)
£000)
Total
£000)
8,098)
1,253)
–)
4)
64,728)
2,579)
(3,122)
614)
55,444)
9,355)
64,799)
55,330)
1,664)
(339)
(25)
7,901)
36)
–)
161)
63,231)
1,700)
(339)
136)
56,630)
8,098)
64,728)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Valuation Process
The Group’s investment properties are valued by David W Smart, MRICS, who is a Director of the Parent Company,
on the basis of fair value, in accordance with the RICS Valuation – Global Standards 2017, incorporating the
International Valuations Standards, and RICS Professional Standards UK January 2014 (revised April 2015). As
in previous years, external valuers have reviewed a sample of the Group’s investment properties and provided
a report to the Group detailing the valuations they would have placed on the sample of investment properties
reviewed. The valuations prepared by the Director and the external valuers are compared to ensure that there are
no material variations between the valuations.
Investment properties, excluding ongoing developments, are valued using the investment method of valuation.
This approach involves applying capitalisation yields to current and estimated future rental streams and then
allowing for voids arising from vacancies and rent free periods and associated running costs. The capitalisation
yields and rental values are based on comparable property and leasing transactions in the market, using the valuers’
professional judgment and market observations. Other factors taken into account in the valuations include the
tenure of the property, tenancy details and ground and structural conditions.
In the case of ongoing developments, the approach applied is the residual method of valuation, which is the same as
the investment method, as described above, with a deduction for all costs necessary to complete the development,
together with a further allowance for remaining risk.
In accordance with IAS 40: Investment Property, net annual surpluses or deicits are taken to the Income Statement
and no depreciation is provided in respect of these properties.
55
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
13.
INVESTMENT PROPERTIES (continued)
The Group considers all of its investment properties fall within ‘Level 3’ of the fair value hierarchy as described
by IFRS 13: Fair Value Measurement. Level 3 valuations are those using inputs for the asset or liability that are
not based on observable market data. The main unobservable inputs relate to estimated rental value and equivalent
yield. There have been no transfers of properties in the fair value hierarchy in the inancial year. The table below
summarises the key unobservable inputs used in the valuation of the Group’s investment properties as at 31st July
2017:
Fair Value
at 31 July
2017
£000
15,089
49,710
Investment
Commercial
Industrial
Estimated Rental Value
£ per sq ft
Low Average High
9.00
4.00
12.00
6.25
15.00
8.50
Equivalent Yield
%
High
Low Average
10.2
7.7
10.5
8.4
11.3
10.2
The following table illustrates the impact of changes in the key unobservable inputs (in isolation) on the fair value
of the Group’s investment properties as at 31st July 2017:
Fair Value
at 31 July
2017
£000
15,089
49,710
5% change in estimated
rental value
Decrease
£000
Increase
£000
25bps change in equivalent
yield
Increase
£000
Decrease
£000
760
2,383
(760)
(2,383)
398
1,405
(380)
(1,328)
Investment
Commercial
Industrial
The Group had obligations of £1,472,000 (2016, £nil) in respect of developments and repair costs of investment
properties at the Balance Sheet date.
56
57
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
14.
INVESTMENTS
Shares in Subsidiaries at Cost .
.
Joint Ventures
.
.
Group
2017
£000
2016
£000
Company
2017)
£000)
2016)
£000)
.
.
.
.
.
.
–
305
–
263
708)
–)
708)
– )
305
263
708)
708)
(a) JOINT VENTURES
At 31st July 2017 the Group’s interests in its Joint Venture Companies are not considered to be material and the
aggregate inancial information for these associate companies is as follows:
Aggregate carrying amount of individually immaterial associates .
Aggregate carrying amount of the Group’s share of:
.
Proit from continuing activities
.
.
Total comprehensive income
Dividend received
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017)
£000)
20161
£000)
305)
263)
42)
33)
42)
33)
–)
(37)
42)
(4)
.
.
.
.
.
.
.
.
The Group accounts for all Joint Ventures using the equity method of accounting.
57
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
14.
INVESTMENTS (continued)
(a) JOINT VENTURES (continued)
Name of Joint Venture
Prestonield Development Company Limited
Northrigg Limited
Duff Street Limited
Invertiel Developments Limited
Registered in and
Principal Country
of Operation
Scotland
Scotland
Scotland
Scotland
J. Smart & Co. (Contractors) PLC
Interest in Joint Venture’s Capital
50%
50%
50%
50%
Name of Joint Venture
Jointly managed with
Issued Share capital
Prestonield Development
Company Limited
Westerwood
Limited
Northrigg Limited
William Sanderson
Duff Street Limited
Kiltane Developments
Limited
Invertiel Developments
Limited
DKG Estates LLP
2 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
2 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
100 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
100 ordinary £1
shares split equally
into A & B shares
and ranking equally
in all respects
Issued shares held
by J. Smart & Co.
(Contractors) PLC
1 B Share
1 A Share
50 A Shares
50 A Shares
All of the Joint Venture companies were established for the purposes of property development and all have
accounting years ending on 31st July.
Prestonield Development Company Limited was dissolved on 22nd August 2017.
Invertiel Developments Limited became dormant in the year.
58
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
14.
INVESTMENTS (continued)
(b) SUBSIDIARIES
At 1st August 2016 and 31st July 2017
.
.
.
.
.
.
2017)
£000)
708)
2016)
£000)
708)
On 3rd August 2016 the Company acquired the entire issued share capital of newly incorporated company Smart
Serviced Ofices Limited for £100 being the nominal value of the shares issued.
At 31st July 2017 the Company held the entire issued share capital of the following companies, all of which are
registered in and operate in Scotland:
McGowan and Company (Contractors) Limited Plumbing contractors
Cramond Real Estate Company Limited
Thomas Menzies (Builders) Limited
Concrete Products (Kirkcaldy) Limited
C. & W. Assets Limited
Smart Serviced Ofices Limited
Investment holding
Civil Engineering contractors
Manufacture of concrete building products
Property company
Serviced ofice space provider
15. AVAILABLE FOR SALE FINANCIAL ASSETS
Group
2017)
£000)
2016)
£000)
Listed investments
.
.
.
.
.
.
.
.
.
1,000)
326)
Fair value movement on shares held at 31st July 2017 before tax amounted to £65,000 (2016, £(10,000)).
There has been no impairment adjustment on available for sale inancial assets in this or the previous year.
As the Group’s available for sale inancial assets consisted entirely of equities of companies listed on quoted markets
then these fall within ‘Level 1’ of the fair value hierarchy as described by IFRS 13: Fair Value Measurement. Level
1 valuations are those using inputs which are quoted prices (unadjusted) in active markets for identical assets or
liabilities the Company can access at the year end date.
58
59
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
16.
INVENTORIES
.
Long-term contract balances
.
Work in progress .
Land held for development
.
Raw materials and consumables
.
Finished goods
.
.
.
.
.
.
.
.
.
.
.
.
.
CONTRACTS IN PROGRESS AT
THE BALANCE SHEET DATE:
Aggregate amount of costs incurred and
recognised proits less recognised losses to date
.
Retentions outstanding .
.
.
Advances received
.
.
.
.
Net value of contracts in progress
.
17.
TRADE AND OTHER RECEIVABLES
.
CURRENT ASSETS:
Trade receivables
.
Amounts owed by Subsidiaries .
.
Other receivables
Prepayments and accrued income
Amounts recoverable on contracts
Loans to Joint Venture companies
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017)
£000)
–)
172)
2,372)
156)
181)
2,881)
Group
Company
2016)
£000)
55)
420)
1,953)
168)
88)
2017)
£000)
–)
172)
2,372)
32)
–)
2016)
£000)
–)
420)
1,953)
33)
–)
2,684)
2,576)
2,406)
12,131)
318)
(12,203)
20,948)
534)
(22,060)
9,505)
318)
(10,001)
19,471)
534)
(20,724)
246)
(578)
(178)
(719)
2,146
–
327
371
1,781
1,098
5,723
2,342
–
147
381
2,402
1,097
591
2,841
224
272
1,357
1,098
454
1,688
163
291
2,316
1,097
6,369
6,383
6,009
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Trade receivables are shown net of provision for doubtful debts of £44,000 (2016, £30,000).
The ageing of past due but not impaired trade debtors is as follows:
Less than 30 days
30 to 60 days
Greater than 60 days
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,471
632
43
2,146
1,870
281
191
560
31
–
422
32
–
2,342
591
454
Trade receivables includes £570,000 (2016, £220,000) in respect of outstanding retentions.
The loans to Joint Venture companies (note 14(a)) are repayable on demand. The Group has charged interest on
one loan to a Joint Venture Company at a rate of 1% above the Group’s banker’s base rate.
Amounts owed by subsidiaries are repayable on demand and are interest free.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
60
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
18.
BANK
Cash and cash equivalents comprise the following:
Group
Cash at bank and on hand
.
Short term deposits
.
.
.
.
.
.
.
.
2017
£000
15,129
11,395
2016
£000
13,837
12,948
Company
2017
£000
–
–
2016
£000
2,948
–
26,524
26,785
–
2,948
Monies held on deposit are held in bank accounts which have original maturity dates exceeding three months and
therefore do not meet the criteria of cash and cash equivalents as deined in IAS 7: Statement of Cash Flows.
The bank has been granted guarantees and letters of offset by each member of the Group in favour of
the bank on account of all other members of the Group as a continuing security for all monies, obligations and
liabilities owing or incurred to the bank.
19.
TRADE AND OTHER PAYABLES
.
CURRENT LIABILITIES:
Trade payables
.
Amounts owed to Subsidiaries .
Other taxes and social security costs
Other creditors and accruals
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2,063
–
220
2,102
4,385
1,629
–
498
3,007
1,444
60
143
1,391
893
118
172
2,210
5,134
3,038
3,393
Included in Other creditors and accruals are contract loss provisions.
20.
FINANCIAL INSTRUMENTS
The Group’s inancial instruments comprise of bank balances and cash, available for sale inancial assets, trade
receivables and trade payables. The amounts presented in relation to trade receivables are net of allowances for
doubtful receivables.
The carrying amount of these assets approximates to their fair value.
CREDIT RISK
In relation to the Group’s inancial assets, the Group has no signiicant concentration of credit risk, as exposure is
spread over a number of counterparties and customers.
There is no signiicant impairment loss recognised or signiicant receivables that are past due but not impaired.
The Group has assessed that there is no signiicant credit risk in relation to loans to Joint Venture companies given
the underlying value of the assets held by these entities.
IFRS 7: Financial Instrument Disclosures requires a company to undertake a sensitivity analysis on its
inancial instruments which are affected by changes in interest rates. The Group inancial instruments
affected by interest rate luctuations are bank deposits and bank overdrafts. Based on the Group’s net
position at the year end, a 1% increase or decrease in the interest rates would change the Group’s proit
before tax by approximately £183,000 and £79,000 respectively (2016, £196,000 and £111,000 respectively).
60
61
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
21.
DEFERRED TAXATION
DEFERRED TAX ASSETS
GROUP
.
At 1st August 2015
Credited to Income Statement .
.
At 31st July 2016
.
.
Credited to Income Statement .
At 31st July 2017
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Other
£000
27
14)
41
17)
58)
Deferred tax assets arising in respect of valuation surpluses on Investment Properties of £774,000 (2016, £1,340,000)
have not been recognised because it is not probable that relevant future taxable proits will be available against
which the Group can use the beneits therefrom.
DEFERRED TAX LIABILITIES
GROUP
.
At 1st August 2015
.
Credited to Equity
Credited to Income Statement .
.
.
At 31st July 2016
.
.
.
Charged to Equity
Credited to Income Statement .
.
At 31st July 2017
.
.
COMPANY
At 1st August 2015
Credited to Equity
Credited to Income Statement
.
.
At 31st July 2016
.
Charged to Equity
Credited to Income Statement
.
At 31st July 2017
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
62
Accelerated Retirement
Beneit
Capital
Other
Timing
Allowances Obligations Differences
£000
£000
£000
Total
£000
1,478
–)
(150)
294
(215)
(73)
58
–
(3)
1,830
(215)
(226)
1,328
6
55
1,389
–
(114)
680)
(29)
–
(3)
680)
(146)
1,214
657
52
1,923
Accelerated Retirement Other
Capital Beneit Timing
Allowances Obligations Differences
£000 £000 £000
36 294 45
– (215) –
(5) (73) (2)
Total
£000
375
(215)
(80)
31 6
43 80
–
680 –
(10) (29) (2)
680)
(41)
21 657
41 719
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
22.
SHARE CAPITAL
Issued and fully paid ordinary shares of 2p each
.
At 1st August 2016
.
.
Purchased and cancelled
.
.
.
.
At 31st July 2017
.
.
.
.
2017
2016
Number
£000
Number
£000
.
.
.
45,304,000
(500,000)
906
(10)
44,804,000
896
45,974,000
(670,000)
45,304,000
919
(13)
906
During the year to 31st July 2017 the Company purchased for cancellation 500,000 ordinary shares of 2p each with
a nominal value of £10,000 for a consideration of £550,000.
All shareholders of ordinary shares have a right to receive dividends paid by the Company in accordance with their
shareholding. Each shareholder has the right to attend and vote at a General Meeting and each share attracts one
vote. There are no restrictions on the distribution of dividends or repayment of capital.
23. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
(a) RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
Proit before tax .
.
Share of proits from Joint Ventures
Depreciation
.
.
Unrealised valuation surplus on investment properties
.
Proit on sale of property, plant and equipment
.
.
Proit on sale of investment properties .
.
Proit on sale of available for sale inancial assets
.
Change in retirement beneits
.
Interest received .
.
Change in inventories
.
Change in receivables
.
Change in payables
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(b) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS
.
Cash and cash equivalents
.
.
Bank overdraft
.
.
Net position
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
4,037
(42)
407
(614)
(39)
(613)
(22)
(523)
(86)
(197)
646)
(749)
2016
£000
3,752
(33)
465
(136)
(47)
(186)
–)
(817)
(125)
3,051
((1,861)
1,134)
2,205
5,197
£000)
26,524
(8,791)
17,733
£000
26,785
(12,628)
14,157
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(c) ANALYSIS OF NET FUNDS
Cash and cash equivalents
.
Bank overdraft
.
Net funds
.
.
.
.
.
.
.
.
.
.
.
.
.
.
63
At 1st
August 2016
£000
26,785
(12,628)
Cash
Flow
£000
(261)
3,837)
At 31st
July 2017
£000
26,524
(8,791)
14,157
3,576
17,733
.
.
.
.
.
.
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
24. NOTES TO THE COMPANY STATEMENT OF CASH FLOWS
(a) RECONCILIATION OF (LOSS)/PROFIT BEFORE TAX TO CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
(Loss)/proit before tax .
Depreciation
.
.
Proit on sale of property, plant and equipment
.
Dividend received from Joint Ventures
.
.
Change in retirement beneits
.
.
Interest received .
.
.
Change in inventories
.
.
Change in receivables
.
Change in payables
.
.
CASH FLOWS FROM OPERATING ACTIVITIES
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(b) CASH AND CASH EQUIVALENTS FOR STATEMENT OF CASH FLOWS
.
Cash and cash equivalents
.
.
Bank overdraft
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
(671)
219
(11)
–)
(523)
(5)
(170)
(374)
(355)
(1,890)
2016
£000
(77)
270
(39)
(37)
(817)
(12)
3,044
((2,131)
732)
1,087
–
2,948
(218)
–)
(218) 2,948
(c) ANALYSIS OF NET FUNDS
Cash and cash equivalents
.
Bank overdraft
.
.
.
.
.
.
.
.
.
.
.
.
At 1st
August 2016
£000
. 2,948
. –)
2,948)
Cash At 31st
Flow July 2017
£000
(2,948)
(218)
(3,166)
£000
–
(218)
(218)
25.
FUTURE CAPITAL EXPENDITURE
There were no amounts of Capital Expenditure relating to Property, plant and equipment contracted for at 31st July
2017 or 31st July 2016.
The Group’s share of Capital Expenditure contracted for by its Joint Ventures as at 31st July 2017 amounted to
£nil (2016, £nil).
64
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
26.
RETIREMENT BENEFIT OBLIGATIONS
The Group operates a deined beneit pension scheme for certain active and former employees of the Group. The
scheme was closed to new members in the year to 31st July 2003. The scheme is subject to the funding legislation
outlined in the Pensions Act 2004 together with documents issued by the Pensions Regulator and Guidance Notes
adopted by the Financial Reporting Council.
The scheme is administered by a separate Board of Trustees which is composed of employer nominated
representatives and member nominated Trustees and is a separate legal entity. The assets of the scheme are held
separately from the assets of the Group and are administered and managed professionally under the supervision
of the Trustees. The Trustees are required by law to act in the best interests of all classes of beneiciaries to the
scheme and are responsible for the investment policy and the day-to-day running of the scheme. The Trustees
are also responsible for jointly agreeing with the employer the level of contributions due to the Pension scheme.
The scheme provides qualifying employees with an annual pension based on inal pensionable salary on attainment
of a normal retirement age of 65. Active members also beneit from life assurance cover. However the payment of
these beneits are at the discretion of the Trustees of the scheme.
The pension scheme’s independent qualiied Actuary carries out a triennial valuation using the Projected Unit
Credit Method to determine the level of the scheme’s surplus or deicit. The last completed triennial valuation was
as at 31st October 2015 which revealed a surplus of £2,783,000, representing a funding level of 110%. Following
this latest triennial valuation the Group and the scheme Trustees agreed that employer contributions to the scheme
as from 31st October 2017 would increase from 27.8% to 31.9% and employee contributions are to remain at 3%.
There were no outstanding contributions at the year end.
The Group expects to pay a contribution of £766,000 during the inancial year to 31st July 2018.
ASSUMPTIONS
The inancial assumptions used to calculate scheme liabilities under IAS 19 (amended): Employee Beneits are:
.
.
.
.
Valuation method
.
Discount rate
.
.
.
Inlation rate - Retail price index
Inlation rate - Consumer price index .
.
Salary increases .
.
Pension increases
.
.
.
.
2017
Projected Unit
2.5%
3.2%
2.3%
3.2%
1.8% – 3.4%
.
.
.
.
.
.
.
.
.
.
.
.
2016
Projected Unit
2.3%
2.6%
1.7%
2.6%
1.5% – 3.0%
2015
Projected Unit
3.5%
3.0%
2.0%
3.0%
1.9% – 3.0%
The mortality assumptions imply the following expectations of years of life from age 65:
2016
21.9
23.7
23.0
25.0
.
.
.
.
2015
21.9
23.9
23.2
25.4
2014
22.0
24.3
23.3
25.8
Man currently aged 65 .
Woman currently aged 65
Man currently aged 45 .
Woman currently aged 45
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
65
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
SENSITIVITY TO KEY ASSUMPTIONS
The scheme exposes the Group to actuarial risks, such as interest rate risk, inlation risk, longevity risk and
investment risk. The key assumptions used for IAS 19 are discount rate, inlation rates and mortality. If different
assumptions were used then this could materially affect the results disclosed in the inancial statements. Movements
in the key assumptions would have the following effect on the level of the deicit:
Change in assumption
Discount rate
Inlation rate
Mortality rate
.
Decrease of 0.25%
Increase of 0.25%
.
Increase in life expectancy of 1 year
.
.
.
.
Increase in scheme liabilities
2016
£000
2017
£000
.
.
.
.
.
.
.
.
.
1,199
322
1,265
1,298
456
1,267
The sensitivity information has been prepared using the same methodology as the calculation of the current year
scheme obligations.
BALANCE SHEET DISCLOSURES
The investments held by the scheme and the reconciliation of the scheme assets and liabilities to the Balance Sheet
were:
EQUITIES
UK
.
Overseas
Multi-asset diversiied funds
Absolute return funds
.
.
.
.
.
BONDS
Government
Corporate
OTHER
Cash
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Fair value of scheme assets
Present value of scheme liabilities
Scheme surplus
.
Deferred taxation
Net pension scheme surplus
.
.
.
.
.
Valuation
2017
£000
.
.
.
.
.
.
.
.
.
.
.
10,861
16,012
2,425
946
991
2,924
3,729
37,888
(34,026)
3,862
(657)
3,205
.
.
.
.
.
.
.
.
.
.
.
Valuation
2016
£000
10,637
13,741
1,594
946
1,069
3,223
3,477
34,687
(34,654)
33
(6)
27
Valuation
2015
£000
9,336
13,342
2,547
–
166
2,813
3,530
31,734
(30,262)
1,472
(294)
1,178
66
67
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
The assets of the scheme are invested in funds managed by Standard Life Wealth, in direct investments via Speirs
& Jeffrey, in insurance policies with companies belonging to the Royal London Group and in bank accounts.
The assets do not include any directly owned ordinary shares issued by J. Smart & Co. (Contractors) PLC. The
fair value of the assets of the pension scheme are determined based on publicly available market prices wherever
available.
2017
£000
2016
£000
(707)
(555)
791
(782)
1,113
(1,047)
9
66
34,654
707
782
(60)
44
(1,628)
(593)
(157)
277
30,262
555
1,047
(60)
53
(1,153)
(157)
(447)
4,554
34,026
34,654
The following amounts are incorporated into the inancial statements
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Analysis of amounts charged to operating proit:
.
Service cost
.
.
.
.
.
Analysis of amounts charged to net inance income:
Interest income
Interest costs
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Movement in present value of deined beneit obligations:
.
.
.
At 1st August 2016
.
.
.
Service cost
.
.
.
Interest cost
.
.
Charges paid
.
.
.
Employee contributions
.
.
.
Beneit payments
Actuarial movements due to scheme experiences
.
.
Actuarial movements due to changes in demographic assumptions .
.
Actuarial movements due to changes in inancial assumptions
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
At 31st July 2017
.
.
.
.
.
.
.
67
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
Movement in fair value of scheme assets:
.
.
At 1st August 2016
.
Interest income
.
.
Employer contributions .
.
Employee contributions .
.
.
Beneits paid
Charges paid
.
.
Return on plan assets excluding amount shown in interest income .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
At 31st July 2017
.
.
.
.
.
Movement in scheme surplus:
.
.
At 1st August 2016
.
.
Current service cost
.
.
Contributions
Net inance income
.
.
Actuarial remeasurement of pension scheme liability
.
.
.
.
.
.
.
.
.
.
.
.
.
At 31st July 2017
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
2016
£000
34,687
791
1,221
44
(1,628)
(60)
2,833
31,734
1,113
1,306
53
(1,153)
(60)
1,694)
37,888
34,687
33
(707)
1,221
9
3,306)
1,472
(555)
1,306
66
(2,256)
3,862
33
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Analysis of the actuarial gain/(loss) included in the statement of comprehensive income:
Return on scheme assets excluding amounts shown in interest income
Changes in assumptions underlying present value of scheme liabilities
.
.
.
.
2,833
473)
1,694)
(3,950)
At 31st July 2017
.
.
.
.
.
.
.
.
.
3,306)
(2,256)
History of experience gains and losses:
Return on scheme assets
Amount (£000)
.
Percentage of market value of scheme assets
Changes in assumptions underlying present value of
scheme liabilities
.
.
.
.
.
.
.
.
Amount (£000)
.
Percentage of market value of scheme liabilities .
Total amounts included in Consolidated Statement of
Comprehensive Income
Amount (£000)
.
Percentage of market value of scheme liabilities .
.
.
.
.
.
2017
2,833
7.5%
2016
2015
2014
2013
1,694
4.9%
802
2.5%
(743)
2.5%
2,776
9.7%
473
1.4%
(3,950)
11.4%
(1,805)
6.0%
(1,050)
3.8%
446
1.7%
3,306
9.7%
(2,256)
6.5%
(1,003)
3.3%
(1,793) 3,222
6.4% 12.4%
.
.
.
.
.
.
68
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
26.
RETIREMENT BENEFIT OBLIGATIONS (continued)
DEFINED CONTRIBUTION SCHEMES
In the year to 31st July 2003 the Group commenced operation of a deined contribution Group Personal Pension
Plan for eligible employees. The plan is externally administered and managed professionally by AEGON UK. The
net contribution to the plan for the year was £212,000 (2016, £188,000).
STAKEHOLDER SCHEMES
The Group has stakeholder pension arrangements for those employees not eligible for membership of either the
Deined Beneit or Deined Contribution schemes. The Group makes contributions to these schemes and has no
liability beyond these contributions. The contributions to these schemes in the year amounted to £62,000 (2016,
£70,000) and are expensed through the Income Statement as incurred.
MULTI EMPLOYER SCHEME
The Group is also a member of the multi-employer pension scheme, Plumbing & Mechanical Services (UK)
Industry Pension Scheme. The Group makes contributions to this scheme which in the year amounted to £26,000
(2016, £30,000) and are expensed through the Income Statement as incurred.
No provision has been made for amounts payable by the Group in respect of Section 75 pension liabilities relating
to the Group’s participation in this scheme given that, as at the date of these inancial statements, any potential
liability has not yet been assessed.
27.
CONTINGENT LIABILITIES
The Company and certain of its Subsidiaries have, in the normal course of business, entered into
counter-indemnities in respect of performance bonds relating to their contracts. As at 31st July 2017 these
amounted to £1,744,000.
28. OPERATING LEASE ARRANGEMENTS
GROUP – AS LESSEE
Future minimum lease payments payable under non-cancellable operating leases:
.
Within one year .
In two – ive years exclusively .
.
After ive years .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
84
250
2016
£000
73
164
180 150
514
387
GROUP – AS LESSOR
Gross property rental income earned in the year amounted to £5,515,000 (2016, £4,994,000). At the Balance Sheet
date, the Group had contracted with its tenants for the following future minimum lease payments:
Within one year .
.
In two – ive years exclusively .
.
After ive years .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5,528
13,650
7,708
26,886
5,301
12,820
6,634
24,755
.
.
.
.
.
.
.
.
.
69
68
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
29.
RELATED PARTY TRANSACTIONS
(a) SUBSIDIARIES
Transactions between the Company and its Subsidiaries, which are related parties of the Company, have been
eliminated on consolidation. Details of transactions between the Company and Subsidiaries are as follows:
SUBSIDIARY
McGowan and Company (Contractors) Limited
Cramond Real Estate Company Limited
Thomas Menzies (Builders) Limited
.
Concrete Products (Kirkcaldy) Limited
.
.
C. & W. Assets Limited .
.
Smart Serviced Ofices Limited
.
.
.
.
.
SUBSIDIARY
McGowan and Company (Contractors) Limited
Cramond Real Estate Company Limited
Thomas Menzies (Builders) Limited
.
Concrete Products (Kirkcaldy) Limited
.
C. & W. Assets Limited .
.
.
Smart Serviced Ofices Limited
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2017
£000
2016
£000
Sale of goods
and services
2017
£000
2016
£000
Purchase of goods
and services
.
.
.
.
.
.
134
–
206
36
3,486
18
134
–
72
40
2,455
–
1,177
–
7
38
–
–
1,357
–
4
50
–
–
Amounts owed
by Subsidiaries
Amounts owed
to Subsidiaries
.
.
.
.
.
.
–
–
24
–
–
–
9
–
2,587 1,679
–
230
59
–
–
1
118
–
–
–
– –
–
–
The amounts outstanding are unsecured and will be settled for cash. No expense has been recognised in the year
for bad or doubtful debts in respect of the amounts owed by Subsidiaries.
(b) JOINT VENTURE COMPANIES
Transactions between the Group and its Joint Venture Companies were the receipt of interest on a loan to one of the
joint venture companies of £5,000 (2016, £6,000), sale of materials and services of £1,000 (2016, £nil) and receipt
of dividends of £nil (2016, £37,000).
The Group was due £2,000 (2016, £3,000) in respect of the loan interest charged to one of the Joint Venture
Companies and £2,000 (2016, £nil) in respect of sale of materials and services. During the year the Group was
repaid £nil (2016, £nil) of outstanding loans to Joint Venture Companies and advanced £1,000 (2016, £1,000) to
Joint Venture Companies.
As at 31st July 2017 loans outstanding from Joint Venture Companies amounted to £1,098,000 (2016, £1,097,000).
The amounts outstanding are unsecured and will be settled for cash. No expense has been recognised in the year
for bad or doubtful debts in respect of the amounts owed by Joint Venture Companies.
70
71
J. Smart & Co. (Contractors) PLC
NOTES TO THE ACCOUNTS (continued)
31st JULY 2017
29.
RELATED PARTY TRANSACTIONS (continued)
(c) DIRECTORS’ INTEREST IN CONTRACTS
John M Smart, David W Smart and John R Smart, throughout the year had material beneicial interests in Plean
Precast Limited, Sterling Precast Limited and The Rooing and Building Supply Co. Limited, which have interests
in continuing contracts for the purchase of materials and services from and for the sale of materials and services
to the Group.
During the year to 31st July 2017 the Group purchased materials amounting to £315,000 (2016, £311,000) from
these companies and sold materials and services amounting to £198,000 (2016, £55,000) to these companies.
All transactions were at normal commercial rates.
As at 31st July 2017 the Group owed these companies £51,000 (2016, £9,000) and was owed £6,000 (2016,
£33,000).
(d) DIRECTORS’ REMUNERATION
The remuneration of the Directors, who are the only key management of the Company, is set out in note 4 to the
Accounts with further information contained in the audited part of the Directors’ Remuneration Report.
(e) DIRECTORS’ DIVIDENDS
During the year the Directors received dividends from the Company as follows:
.
John M Smart
.
David W Smart
.
John R Smart
Alasdair H Ross .
Patricia Sweeney .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(f) DIRECTORS’ TRANSACTIONS
2017
£000
11
113
113
3
–
The following Directors received goods and services from Group Companies in the year amounting to:
John M Smart
.
David W Smart
.
.
John R Smart
Alasdair H Ross .
Patricia Sweeney .
3
1
2
–
–
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2016
£000
11
109
109
3
–
2
2
1
8
–
All transactions were at normal commercial rates.
(g) PENSION SCHEMES
Disclosures in relation to the pension schemes are included in note 26 to the Accounts.
During the year the Company paid fees and expenses on behalf of the deined beneit pension scheme amounting
to £169,000 (2016, £33,000).
70
71
72
73
72
73
Printed by Multiprint (Scotland) Limited, Kirkcaldy
74